|Normal backwardation theory|
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Definition of Normal backwardation theory
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected
Part of the return that is not due to systematic influences (market wide influences). In
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by
A market condition in which futures prices are lower in the distant delivery months than in
Security prices sometimes move wildly above their true values.
CARs (cumulative abnormal returns)
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the
expectations theory of exchange rates
theory that expected spot exchange rate equals the forward rate.
Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward
Local expectations theory
A form of the pure expectations theory which suggests that the returns on bonds
A distribution where the logarithm of the variable follows a normal distribution.
Market segmentation theory or preferred habitat theory
A biased expectations theory that asserts that the
Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices
net cost of normal spoilage
the cost of spoiled work less the estimated disposal value of that work
Normal annuity form
The manner in which retirement benefits are paid out.
Normal (bell-shaped) distribution
In statistics, a theoretical frequency
the long-run (5–10 years) average production
normal cost system
a valuation method that uses actual
Related: standardized value
an expected decline in units during the production process
A customized benchmark that includes all the securities from which a manager normally
Normal probability distribution
A probability distribution for a continuous random variable that is forms a
Normal random variable
A random variable that has a normal probability distribution.
spoilage that has been planned or foreseen; is a product cost
The practice of making a charge in the income account equivalent to the tax savings
pecking order theory
Firms prefer to issue debt rather than equity if internal finance is insufficient.
Preferred habitat theory
A biased expectations theory that believes the term structure reflects the
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected
Quantity Theory of Money
theory that velocity is constant, and so a change in money supply will change nominal income by the same percentage. Formalized by the equation Mv = PQ.
random walk theory
Security prices change randomly, with no predictable trends or patterns.
Real Business Cycle Theory
Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.
Spoilage arising from the production process that exceeds the normal
The amount of spoilage that naturally arises as part of a production
Standardized normal distribution
A normal distribution with a mean of 0 and a standard deviation of 1.
Static theory of capital structure
theory that the firm's capital structure is determined by a trade-off of the
theory of constraints (TOC)
a method of analyzing the bottlenecks
Debt levels are chosen to balance interest tax shields against the costs of financial distress.
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