Arbitrage Pricing Theory (APT): An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted performance or alpha.

 

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Arbitrage Pricing Theory (APT): An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The APT implies that there are multiple risk factors that need to b . . . View Full Definition

Preferred Habitat Theory: A biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. The theory rejects the assertion that the . . . View Full Definition

Presidential Election Cycle Theory: A theory that stock market trends can be predicted and explained by the four-year presidential election cycle.

Organizational Behavior Modification Theory: A motivational theory suggesting that an individual will behave in a manner that helps him or her avoid potential negative outcomes and achieve agreeable outcomes.

Odd-Lot Theory: The theory that profits can be made by making trades contrary to odd-lot trading patterns, since odd-lot investors have poor timing. This theory is no longer popular.

Optimal Foraging Theory: A theory designed to predict the foraging behavior that maximizes food intake per unit time

Pricing Efficiency: Also called external efficiency; a market characteristic that prices at all times fully reflect all available information that is relevant to the valuation of securities.

Proof Theory: This deals with the actual 'logic' of the programming. Using mathematical analysis techniques, the programming language is proof checked.

Risk Arbitrage: Traditionally, the simultaneous purchase of stock in a company being acquired and the sale of stock of the acquirer. Modern risk arbitrage focuses on capturing the spreads between the market . . . View Full Definition

Regulatory Pricing Risk: Risk that arises when insurance companies are subject to regulation of the premium rates that can they charge.