Stock Trading News

Sector rotation is a strategy used in financial markets, where traders/investors allocate their investments across various economic sectors at different times, aligning with the business cycle. This approach is predicated on the observation that different sectors of the economy perform differently during various phases of the business cycle.   The Business Cycle and Sector Performance […]

The Fisher Separation Theorem, formulated by Irving Fisher, is a fundamental principle in economics and finance. It delineates the relationship between investment decisions and consumption preferences, irrespective of market conditions and personal bias.   Key Takeaways – Fisher Separation Theorem Separates investment decisions from consumption preferences. Asserts that investment choices are driven by profit maximization. […]

With all the ups and downs of markets, the key consideration behind any asset comes down to whether it makes money and whether it represents a yield commensurate with what you need and what risks you’re taking on in order to achieve it. In this article, we’ll look at various types of cash flowing assets […]

Financial markets are heavily influenced by tax policies. These policies can determine the flow of money and credit, investment choices, and how companies are valued. We discuss how tax policy can shape financial markets.   Key Takeaways – Impact of Tax Policy on Markets Direct Influence on Corporate Profitability: Tax policies, especially corporate tax rates, […]

Linear algebra, a branch of mathematics, is used in various financial applications. It provides a structured way to solve systems of linear equations, a common problem in finance.   Key Takeaways – Linear Algebra in Finance & Markets Risk and Return Modeling Linear algebra is used to quantify risk and optimize returns in portfolios through […]

Maslowian Portfolio Theory is a conceptual framework in finance that integrates psychological elements into investment strategy. It’s inspired by Abraham Maslow’s hierarchy of needs, a psychological theory that categorizes human needs into a pyramid, from basic survival needs like food, water, and shelter to self-actualization (achieving your aspirations).   Key Takeaways – Maslowian Portfolio Theory […]

Stochastic Portfolio Theory (SPT) is a mathematical framework used to analyze and manage portfolios of assets in probabilistic terms. It extends the classical Markowitz portfolio theory by incorporating the randomness inherent in financial markets.   Key Takeaways – Stochastic Portfolio Theory & Chance-Constrained Portfolio Selection Stochastic Portfolio Theory (SPT) focuses on understanding and exploiting patterns […]

Roy’s Safety-First Criterion, formulated by A.D. Roy in 1952, is a risk management approach in portfolio selection. This criterion focuses on minimizing the probability of portfolio returns falling below a threshold level, known as the disaster level. It’s particularly relevant for investors who prioritize capital preservation over high returns.   Theoretical Framework Roy’s criterion is […]

The Kelly Criterion is a mathematical formula used to determine the optimal size of a series of bets. Developed by John L. Kelly Jr. in 1956, it has found application in gambling, trading, investing, and risk management. The criterion aims to maximize the logarithm of wealth. This offers a strategic edge in scenarios where the […]

Correlation and covariance are statistical measures in asset allocation. They provide information on how different financial assets move in relation to each other. Covariance measures the directional relationship between the returns of two assets. When the covariance is positive, asset returns move together; if negative, they move inversely. Correlation, meanwhile, standardizes this relationship, expressing it […]