Stock Trading News

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 […]

Particle Filters or Sequential Monte Carlo Methods – a Bayesian inference technique and machine learning algorithm – is increasingly relevant in quantitative finance and high-frequency trading (HFT). This method employs a set of random samples, or “particles,” to approximate the posterior distribution of a stochastic process. In the context of HFT, particle filtering can help […]

Extreme Value Theory (EVT) is a branch of statistics dealing with the extreme deviations from the median of probability distributions. It focuses on understanding the behavior of the tails of distributions, which is important in finance and risk management.   Key Takeaways – Extreme Value Theory (EVT) Risk Assessment EVT assesses the risks of rare, […]

The Beneish M-Score is a statistical model that is used to detect whether a company has manipulated its earnings. The model was created by professor Messod Beneish in June 1999 after publishing a paper called The Detection of Earnings Manipulation. The logic behind the Beneish M-Score is that a combination of aggressive revenue recognition practices, […]