## What is market equilibrium?

Market Equilibrium occurs when&nbsp;fluctuations between supply&nbsp;and&nbsp;demand balance out, keeping prices relatively stable. This&nbsp;trend&nbsp;appears relatively horizontal or sideways when charted. Both price equilibrium and quantity equilibrium should meet at the same point where the supply and demand curves meet on a chart. According to the Law of Supply, with all factors being equal, if the price of a good or service increases, the supply of that good or service will increase. If demand doesn't meet it, the price of that good or service must come down; this increases demand but might cause a shortage in supply, which might drive prices back up, and so on. Continue reading...

## What is the Law of Supply?

All other things being equal, if the price of a good increases, the supply of that good will increase, and this is known as the Law of Supply. The Supply Curve is plotted on a graph with a y-axis being price and an x-axis being quantity. The relationship is positive and the line will climb up to the right. The is the opposite direction of the Demand Curve, and the place where the two intersect is considered to be the point of market equilibrium. The curves can be shifted by variables not present on the graph, such as changes in levels of income and other factors, but the slopes will remain the same, theoretically. Continue reading...

## What is market disequilibrium?

Market Disequilibrium occurs when market and external forces combine to unbalance a market, creating&nbsp;inefficiency in the market in the process. A disequilibrium produces what’s called a “deadweight loss,” “welfare loss,” “excess burden,” or “allocative inefficiency.” As described by&nbsp;efficient market theory, the&nbsp;price fluctuations&nbsp;we see in market behavior are the market trying to find its truly&nbsp;efficient price and quantity – the theoretical point of equilibrium. Investors attempt to locate it using&nbsp;moving averages&nbsp;and other means of&nbsp;technical analysis. Continue reading...

## What is a Market Maker?

A market maker is a broker-dealer firm or a registered individual that will hold a certain number of shares of a security in order to facilitate trading. There could be as many as 50 market makers for one particular security, and they compete for customer order flows by displaying buy and sell quotations for a guaranteed number of shares. The market maker spread refers to the difference between the amount a market maker is willing to pay for a security and the amount that the other party is willing to sell it. Continue reading...

## What Does Mark to Market (MTM) Mean?

Mark to Market (MTM) is an accounting method meant to price an asset by its most recent market price. An example would be mutual funds, whose “NAV” price is a mark to market price of how much the mutual fund closed for at the end of a trading session. The mark to market accounting method has some pros and cons. On the pro side, if an asset is very liquid, then MTM will provide an accurate reflection of its current value. Continue reading...

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## What is market efficiency?

Market efficiency describes the degree to which relevant information is integrated into the price of a security. With the prevalence of information technology today, markets are considered highly efficient; most investors have access to the same information with prices and industry news, updated instantaneously. The Efficient Market Hypothesis stems from this idea. Efficient markets are said to have all relevant information priced-in to the securities almost immediately. High trading volume also makes a market more efficient, as there is a high degree of liquidity for buyers and sellers, and the spread between bid and ask prices narrows. Continue reading...

## What Is Nash Equilibrium?

Nash equilibrium, a critical concept in game theory, signifies the optimal outcome when no player has an incentive to change their strategy, knowing their opponents’ strategies. It's where an individual's action, given the actions of others, leads to the best possible result for all involved. However, it doesn't guarantee the best individual payoff in every situation. Continue reading...

## What is the random walk hypothesis?

The Random Walk Hypothesis states that in an efficient market, prices will correlate around the intrinsic value of securities, but there will always be a randomization and unpredictability to it. The Random Walk Hypothesis suggests that technical analysis and the efforts of chartists cannot beat the market over time, because the market will move randomly and unpredictably, and past results cannot predict future returns. Continue reading...

## What is market research?

Market research is the process of evaluating a possible opportunity for entering into a market with a new product or company, or for evaluating the effectiveness of a product or company in a market that they are already invested in. Market research can also be important for decisions regarding mergers and acquisitions. It may involve surveys and market study groups. Sometimes a company will conduct its own market research, but often third-party companies are hired for the task. These companies may specialize in sampling and surveying methods for consumer groups, and/or statistical analysis of a business model or product’s chance of success in a given market. Companies may look to such analysts if they are considering a merger or acquisition, or of launching a new product. Continue reading...

## What is a market-on-open order?

Traders can enter time-specific trade orders in the form of opening or closing orders, which are only to be executed as close to the opening or closing price as possible. Market-on-open orders are looking to buy or sell immediately after the market opens, at the opening price. Market-on-open orders are instructions for a broker or floor trader (even though we don’t see those much anymore these days) to buy or sell shares at opening price of the stock being traded. Continue reading...

## What is market saturation?

Market Saturation is the point at which there are few consumers that are still interested in buying a product because those who were ever likely to already have done so. Saturation can be said to exist for all similar products in a market. This may call for different strategies which could keep a company going. One is that products can be made to wear out after a certain amount of time and need replacement. Another is that the business can shift its focus to subscription or service-based income. Continue reading...

## What is market share?

Market share is the percentage of the total amount of similar products sold in a marketplace that are constituted by a particular product or the products of a particular company. This sometimes used synonymously with the term Market Penetration. Most industries have many competitors offering essentially the same services and products; in fact that is a sign of a healthy capitalistic marketplace. The market share of a company is the proportion of the total sales in that industry that belong to their company. Continue reading...

## What is market exposure?

Market exposure is the degree to which an investor is participating in the risks and returns of the market as a whole or a particular sector. Exposure can have a positive or negative connotation, but, as they say, “nothing ventured, nothing gained.” Market exposure allows an investor to participate in the potential upside of the market, but can also subject the investor to the inherent risks. Some people save money religiously but are not likely to retire the way they want to because they aren’t willing to let their money be risked in the market. Continue reading...

## Are the markets efficient?

The concept of an efficient market is more applicable today than it was when it was conceived, a truly efficient market is nearly impossible. The Efficient Market Hypothesis states that random new information will affect the value of securities, and that new information disseminates so quickly among rational investors that it is futile to try to beat the “market portfolio.” Thirty years ago, this was more of a theory than an observable phenomenon, and plenty of inefficiencies in the dissemination of information and the pricing of securities could be pointed out. Continue reading...

## What Is Market Capitalization?

Market capitalization is a measure of a company’s size, in terms of the value of its total outstanding shares. Most readers have probably heard of large-cap, mid-cap, and small-cap stocks. These classifications are based on the market capitalization of a company, which is defined as the number of a company's outstanding shares multiplied by the price of one share. For example, if company ABC issued 1,000 shares and it is trading at \$10/share, then the market capitalization of company ABC is 1,000 x 10 = \$10,000. The largest company by market capitalization as of the time of this writing is Apple Inc. Its market capitalization exceeds \$750 billion. Continue reading...

## What are futures markets?

Futures markets are the formal exchanges on which futures contracts are bought and sold for commodities, financial products, and interest rates. Futures markets constitute a large part of the financial system and are an attempt by participants to hedge against some of the volatility and risks to which they might be exposed as time passes, especially where contracts await resolution or payment. Futures contracts might be created for financial instruments, commodities, and other derivative interests. The Chicago Mercantile Exchange, the Intercontinental Exchange (ICE) and the Eurex Exchange are large parts of the international network of futures markets and clearing houses. Continue reading...

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## What is secondary market?

The secondary markets are where most trading goes on today, where the trades are made investor-to-investor using shares that were issued sometime before, and profits are made by investors and not the underlying company who issued the shares originally. The secondary market is a term used to describe the market created by those who are selling and buying shares which were issued some time ago in what's called the primary market. Continue reading...

## What is a bear market?

Bear markets are loosely defined as periods when markets experience declines in magnitude of 20% or more. More specifically, bear markets are a period in which a major index like the S&amp;P 500, for example, declines by 20% or more, with this decline sustained for a period over two months or so. Consequently, many investors become “bearish” – they lose confidence in the market, sell off their securities they do not believe will recover soon, and sit on the sidelines. There have been 25 bear markets since 1929, for an average of one every 3.4 years. Continue reading...

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## What is a bull market?

Bull markets are defined as periods of sustained investor confidence and market growth, as prices trend higher and indexes rise over time. These stretches are typically tied to economic growth and strength. When investor sentiment is “bullish,” investors are generally willing to take more risk. These extended periods of growth typically last for months but can last for years. There are more technical definitions of a bull market, depending on which index, commodity, and other asset is being considered. As a general rule, however, bull markets tend to see stocks rise by 20% in response to a 20% decline, before eventually declining by 20% again to signal the end of the bull run. The longest bull run in S&amp;P 500 history took place from March 2009 to March 2020, experiencing well over 300% growth over that time. Continue reading...