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A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange as well as stock that is only traded privately, such as shares of private companies that are sold to investors through equity crowdfunding platforms. Investments are usually made with an investment strategy in mind.
An economic bubble is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be caused by overly optimistic projections about the scale and sustainability of growth, and/or by the belief that intrinsic valuation is no longer relevant when making an investment. They have appeared in most asset classes, including equities, commodities, real estate, and even esoteric assets. Bubbles usually form as a result of either excess liquidity in markets, and/or changed investor psychology. Large multi-asset bubbles, are attributed to central banking liquidity.
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.
The January effect is a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month of January more than in any other month. This calendar effect would create an opportunity for investors to buy stocks for lower prices before January and sell them after their value increases. As with all calendar effects, if true, it would suggest that the market is not efficient, as market efficiency would suggest that this effect should disappear.
Market timing is the strategy of making buying or selling decisions of financial assets by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market rather than for a particular financial asset.
A market anomaly in a financial market is predictability that seems to be inconsistent with theories of asset prices. Standard theories include the capital asset pricing model and the Fama-French Three Factor Model, but a lack of agreement among academics about the proper theory leads many to refer to anomalies without a reference to a benchmark theory. Indeed, many academics simply refer to anomalies as "return predictors", avoiding the problem of defining a benchmark theory.
Market sentiment, also known as investor attention, is the general prevailing attitude of investors as to anticipated price development in a market. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events. If investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement. Market participants who maintain a static sentiment, regardless of market conditions, are described as permabulls and permabears respectively. Market sentiment is usually considered as a contrarian indicator: what most people expect is a good thing to bet against. Market sentiment is used because it is believed to be a good predictor of market moves, especially when it is more extreme. Very bearish sentiment is usually followed by the market going up more than normal, and vice versa. A bull market refers to a sustained period of either realized or expected price rises, whereas a bear market is used to describe when an index or stock has fallen 20% or more from a recent high for a sustained length of time.
Momentum investing is a system of buying stocks or other securities that have had high returns over the past three-to-twelve months, and selling those that have had poor returns over the same period.
In financial economics and accounting research, post–earnings-announcement drift or PEAD is the tendency for a stock’s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks following an earnings announcement.
An event study is a statistical method to assess the impact of an event.
In economics and finance, market manipulation is a type of market abuse where there is a deliberate attempt to interfere with the free and fair operation of the market; the most blatant of cases involve creating false or misleading appearances with respect to the price of, or market for, a product, security or commodity.
The adaptive market hypothesis, as proposed by Andrew Lo, is an attempt to reconcile economic theories based on the efficient market hypothesis with behavioral economics, by applying the principles of evolution to financial interactions: competition, adaptation, and natural selection. This view is part of a larger school of thought known as Evolutionary Economics.
In economics, a spillover is a positive or a negative, but more often negative, impact experienced in one region or across the world due to an independent event occurring from an unrelated environment.
In finance, momentum is the empirically observed tendency for rising asset prices or securities return to rise further, and falling prices to keep falling. For instance, it was shown that stocks with strong past performance continue to outperform stocks with poor past performance in the next period with an average excess return of about 1% per month. Momentum signals have been used by financial analysts in their buy and sell recommendations.
Stock market cycles are proposed patterns that proponents argue may exist in stock markets. Many such cycles have been proposed, such as tying stock market changes to political leadership, or fluctuations in commodity prices. Some stock market designs are universally recognized. However, many academics and professional investors are skeptical of any theory claiming to identify or predict stock market cycles precisely. Some sources argue identifying any such patterns as a "cycle" is a misnomer, because of their non-cyclical nature. Economists using efficient-market hypothesis say that asset prices reflect all available information meaning that it is impossible to systematically beat the market by taking advantage of such cycles.
The Congressional effect is a stock market phenomenon or calendar effect, where stock prices tend to show a correlation in performance and volatility to the operating schedules of the US Congress. The phenomenon was coined as “The Congressional effect” by Eric T. Singer, a New York based finance professional and mutual fund manager.
Seasonal spread traders are spread traders that take advantage of seasonal patterns by holding long and short positions in futures contracts simultaneously in the same or a related commodity markets based on seasonal patterns. These are traded on futures exchanges such as the Chicago Mercantile Exchange, the New York Mercantile Exchange, or the London Metal Exchange among others.
A share price is the price of a single share of a number of saleable equity shares of a company. In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.
In investing and finance, the low-volatility anomaly is the observation that low-volatility securities have higher returns than high-volatility securities in most markets studied. This is an example of a stock market anomaly since it contradicts the central prediction of many financial theories that higher returns can only be achieved by taking more risk.
Factor investing is an investment approach that involves targeting quantifiable firm characteristics or "factors" that can explain differences in stock returns. Security characteristics that may be included in a factor-based approach include size, low-volatility, value, momentum, asset growth, profitability, leverage, term and carry.
References
- ↑ "September Is Just a Month". September 2, 2013.
- ↑ Singal, Vijay (December 2003). "3". Beyond the Random Walk - The Weekend Effect.
- ↑ "Day-of-the-week effect: a meta-analysis". 25 September 2024 – via Springer Science+Business Media.
- ↑ Ewald, Christian-Oliver; Haugom, Erik; Lien, Gudbrand; Størdal, Ståle; Wu, Yuexiang (November 2022). "Trading time seasonality in commodity futures: An opportunity for arbitrage in the natural gas and crude oil markets?" – via ScienceDirect.
- ↑ Evangelou, Nadia (January 2, 2019). "Seasonality in the Housing Market". National Association of Realtors .
- ↑ Vasileiou, Evangelos (April 2018). "Is the turn of the month effect an "abnormal normality"? Controversial findings, new patterns and…hidden signs(?)". Research in International Business and Finance. 44: 153–175. doi:10.1016/j.ribaf.2017.07.057. ISSN 0275-5319. S2CID 157633009.
- ↑ Schwert, G. William (2003), "Chapter 15 Anomalies and market efficiency", Handbook of the Economics of Finance, Elsevier, pp. 939–974, ISBN 9780444513632
- ↑ Sullivan, Ryan; Timmermann, Allan; White, Halbert (November 2001), "Dangers of data mining: The case of calendar effects in stock returns", Journal of Econometrics , 105: 249–286, doi:10.1016/S0304-4076(01)00077-X
- ↑ Vasileiou, Evangelos (2015). "Long Live Day of the Week Patterns and the Financial Trends' Role. Evidence from the Greek Stock Market during the Euro Era (2002-12)". Investment Management and Financial Innovations. 12 (3). doi:10.2139/ssrn.2338430. ISSN 1556-5068. S2CID 154992237. SSRN 2338430.