|Pure expectations theory|
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Definition of Pure expectations theory
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected
Related: pure expectations theory.
A form of the pure expectations theory which suggests that the returns on bonds
A variant of pure expectations theory which suggests that the return that an
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
An alternative model to the capital asset pricing model developed by
Security prices sometimes move wildly above their true values.
Theories of the term structure of interest rates which include the pure
An assumption of Markowitz portfolio construction that investors
A biased expectations theory that asserts that the implied forward
A biased expectations theory that asserts that the
Principles underlying the analysis and evaluation of rational portfolio choices
Holds that the futures price will be bid down to a level below the expected
A biased expectations theory that believes the term structure reflects the
A bond that will make only one payment of principal and interest. Also called a zerocoupon
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.
Pure yield pickup swap
Moving to higher yield bonds.
The idea that people rationally anticipate the future and respond to what they see ahead.
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
expectations theory of exchange rates
theory that expected spot exchange rate equals the forward rate.
pecking order theory
Firms prefer to issue debt rather than equity if internal finance is insufficient.
random walk theory
Security prices change randomly, with no predictable trends or patterns.
Debt levels are chosen to balance interest tax shields against the costs of financial distress.
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.
The best forecasts that can be made given the data available and knowledge of how the economy operates. Rational expectations implies random errors, no systematic errors.
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.
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