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time-weighted return
treat each time period individually, then find the geometric mean
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bank discount yield
(Face value - Current value)/Face value * 360/time to maturity
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money market yield
HPR*360/time to maturity
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dollar(money)-weighted return
Exact same thing as IRR, just make NPV = 0
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sampling error
difference between sample statistic and population statistic
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Trading index (TRIN) or Arms Index
- measures trading volumes of advancing vs declining stocks
- less than 1 indicates more volume in advancing stocks
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priori probability
a simple probability based on the population size. If a stock can go up, down, or stay the same, then using priori each would have a 1/3 chance.
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cross sectional vs time series data
- cross sectional: sample taken at a given point in time
- time series data: sample taken over a period of time
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parametric vs nonparametric tests
- parametric: many assumptions about the population distribution
- nonparametric: may be most appropriate when heavily skewed
- both: often used in conjunction with each other
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trading volume, head and shoulder trend
head and shoulder trends are more validated when volume decreases along them, showing that supply and demand forces that were acting before are weakening
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Kurtosis
> 3 => fat tails
leptokurtic = more kurtosis
platykurtic = little kurtosis
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roy's safety first criteria
choose portfolio with highest (Return - threshold)/standard deviation
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%K and %D, MACD and signal line
%K is (current low - lowest low)/(highest - lowest). %D is moving average of %K. K above D implies buy, K below D implies sell
signal line is moving average of MACD line. MACD < signal implies sell, MACD > signal implies buy
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technical analysis
market moves (supply and demand) are based on rational and irrational behavior
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