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What is quantitative analysis?
The attempt to represent events and phenomena mathematically and to thereby make reality more understandable is called quantitative analysis. To quantify something from the real world, an analyst will translate the factors and variables present in a real event into a coding system which will allow it to be represented in mathematical or computational symbology. The quantitative analysis that follows will attempt to create formulas and test them for external validity and replicability. Continue reading...
What is the Law of Demand?
The Law of Demand states that as prices increase, demand will decrease, and vice versa. That is to say, price and quantity are inversely related. There are some things which have an inelastic demand, meaning the quantity demanded will remain constant no matter the price. Medicine is a good example. Vices to which people are addicted are as well, so some degree, and tobacco stocks are considered fairly safe and defensive in bad economic times. Continue reading...
How Many Dollars do We Have in Circulation?
According to the Federal Reserve, there are over 1.7 trillion U.S. Dollars in circulation. This number has been drastically increasing throughout the last few years, mostly due to programs such as Quantitative Easing. As of 2016, QE programs have ended and the Fed's balance sheet is shrinking, but M2 money supply still remains at elevated levels. What is the Size of our National Debt? What is Currency in Circulation? Continue reading...
How does Quantitative Easing (QE) function and what is its purpose?
Unlock the secrets of Quantitative Easing (QE)! Discover how central banks use QE to supercharge economies during crises. Dive into its mechanisms, learn its impact from real-world examples, and unravel the controversies surrounding its effectiveness. Stay tuned for a deep dive into the world of monetary policy. #QEExplained #EconomicGrowth Continue reading...
How Does Pareto Analysis Harness the 80-20 Rule to Impact Decision Making?
Unlock the power of the 80-20 rule with Pareto Analysis! Dive into this transformative decision-making tool and discover how to pinpoint key challenges, allocate resources wisely, and drive unparalleled business growth. Ready to master the art of prioritization? Continue reading...
What is Investment Analysis?
Investment analysis is the practice of evaluating assets or securities in terms of value, risk and return, as well as correlation with other assets. It is to determine their possible place within various strategies and portfolios. Some analysis will be done seeking the best option for specific asset classes, some analysis will focus on the best overall portfolio for a given situation. Analysis is done using quantitative metrics and indicators, some of which can be considered fundamental analysis tools and some of which are technical analysis tools. Continue reading...
What is standard deviation?
Standard Deviation is a measurement of how far from the average (mean) the majority of a data set lies. Standard Deviation is a measure of variability, and it is on a different scale for each data set being measured; there is no “standard” standard deviation. It is possible to normalize it for comparison to other data sets using measurements like r-squared and the sharpe ratio. The number arrived at when computing standard deviation is going to reveal the distance, in terms of one of the quantifiable variables being observed, from the average, in either a positive or negative direction, within which 68% of the data set falls. Continue reading...
What is the definition of statistics in the context of mathematics?
In the finance world, data is king. Learn how statistics shapes investment decisions, risk assessment, and financial strategies. Dive into descriptive & inferential stats, real-world applications, and its pivotal role in achieving financial success. Don't miss out! #FinanceStats Continue reading...
What is Lifestyle Inflation?
Lifestyle inflation is a term used in personal financial planning for the tendency of people to increase their spending and standard of living right along with any raises and monetary resources, even if it’s is at the detriment of any plans for debt reduction or long-term savings. Monetary inflation describes the phenomenon when more money has no more utility value than a lesser amount used to because the cost of goods is going up. Lifestyle inflation is when people select higher-priced goods and lifestyle spending habits when they have the money available to do so. Continue reading...
What Are Line Graphs and How Do They Enhance Financial Analysis?
Line graphs, more than just lines on a chart, are pivotal tools in finance, offering a visual narrative of data changes over time. From stock prices to revenue patterns, these graphs provide invaluable insights into historical trends. Whether it's the simple line graph showcasing inflation trends or the multiple line graph comparing various commodities, they serve as a window into the financial world. But how are they constructed, and what makes them so effective? Dive into the intricacies of line graphs, from their foundational components to their applications, and harness their power for insightful data visualization and decision-making. 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 a Buying Hedge?
Hedging against future price risk was the main reason Futures contracts came into being. If an investor or a business knows that they need to acquire an asset or security at a future date, they might go ahead and agree to a price and have it in writing on a Futures contract. A futures contract means that an item has been sold at a stated price, and only awaits settlement at a future date. This will protect them from the risk that the price will move unfavorably in the future, and it will allow them to balance books and plan a budget with more certainty. Futures contracts are standardized and traded on exchanges. Continue reading...
How to use Momentum Indicators in trading
A momentum indicator allows for a quick comparison of a security’s current price relative to its past prices using a flexible time period, allowing traders to decide the parameters. The formula to calculate momentum is M = V – Vx (where V is the current price and Vx is the closing price from x number of days ago). A current price in excess of past price is a positive momentum indicator; a lower current price represents negative momentum. Continue reading...
What is market equilibrium?
Market Equilibrium occurs when fluctuations between supply and demand balance out, keeping prices relatively stable. This trend 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 Nasdaq 100 Index?
Unlock the secrets of the Nasdaq 100 Index! From tech titans like Microsoft and Apple to innovative sectors shaping our future, dive deep into the world of top companies and investment avenues. Your journey into global market performance starts here. Continue reading...
What is the Correlation Coefficient, and how does it inform investors?
Unlock the secrets of the Correlation Coefficient! 📈 Dive into its power to decipher relationships in finance. Learn how it aids investors, without the complexities of risk. Discover the strength, applications, calculations, and limitations of this vital tool. 🤝💼 #Investing #Finance101 Continue reading...
What is the Advance/Decline Divergence Oscillator?
The advance/decline divergence oscillator (also called the McClellan Oscillator after its creators) tracks the rate of change in the advance-decline line (net advances). The AD line is formed from the Net Advances/Declines calculated daily at market close; this represents the proportion of stocks which advanced (increased) in price that day versus those which declined – the size of the difference is called the daily breadth. The advance/decline divergence oscillator can be applied to any group of stocks or exchange. Continue reading...
What are pink sheets?
The Pink Sheets used to be printed on pink paper and contained the bid and ask prices of penny stocks which were not listed on major exchanges. Today the Pink Sheets are operated online by OTC Markets Inc but fulfill the same role. The Pink Sheets will list penny stocks which may or may not be found on other micro-cap exchanges. To be listed on the Pink Sheets, there are no listing requirements, such as cap-size; companies must only file one form and which provides some current financial information, but update information may not be required as time goes on, and hence companies listed only on the pink sheets are considered the most speculative and risky equity plays an investor can make. Continue reading...
What is Demand?
Demand is a measure of consumer’s desire to purchase goods and services. High demand for a product typically puts upward pressure on price, and vice versa. Demand is a key metric in reading price trends and a company’s ability to set price point. Weaker demand on a global macro level implies that countries are investing less, developing less, and therefore focused less on growth. Sustained downtrends in demand will generally lead to recessionary conditions. Often times, central banks will try to step-in and stoke demand by lowering the cost of money (interest rates). Continue reading...
What is Managerial Accounting and How Does Managerial Accounting Differ from Financial Accounting?
Discover the intricacies of managerial accounting, the backbone of informed business decisions. This guide unravels the essence of managerial accounting, highlighting its role in internal decision-making, planning, and performance tracking. Learn about its key pillars, the differences from financial accounting, and its multifaceted applications in businesses, from product costing to cash flow analysis. Whether you're a business owner, an aspiring accountant, or someone keen on understanding the financial underpinnings of an organization, this article offers a deep dive into the world of managerial accounting, equipping you with the knowledge to navigate the financial landscape of modern organizations. Continue reading...