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Odd lot theory |
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Odd lot theoryThe 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.Odd lot theory Similar MatchesLocal expectations theoryLocal expectations theoryA form of the pure expectations theory that suggests that the returns on bonds of different maturities will be the same over a short-term investment horizon. Capital market theoryCapital market theoryThe generic term for models which aim to price assets, usually shares or baskets of them, in terms of the trade-off between risk and return that investors seek.The best known and most influential of these is the Capital Asset Pricing Model. Expectations theory of forward exchange ratesExpectations theory of forward exchange ratesA theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate. Efficient market theoryEfficient market theoryThe theory that claims that the current price of a share reflects everything that is known about the company and its future earnings potential, and that is it impossible to beat the market consistently.Efficient market theory suggests that the army of analysts and fund managers in the City whose job is to actively manage superior-performing portfolios are engaged in a futile exercise because everything they find out is rapidly transmitted around the market, and share prices instantly reflect the common knowledge. In other words, no one can get one up on anyone else. And the logical extension of this is that passive funds - tracker and index funds - are the best place to park your money, because their management costs are much lower and they are mathematically structured to match the performance of their chosen index.Plenty of people disagree with efficient market theory, and their ranks include people like Warren Buffett who has consistently produced returns of over 20% on his portfolio over a 30 year period. Conduit theoryConduit theoryA theory that because investment companies are merely conduits for capital gains, dividends, and interest, which are in fact passed through to shareholders, the investment company should not be taxed at the corporate level. Further SuggestionsPreferred habitat theoryNormal backwardation theory Dependency Theory Elliott Wave Theory Greater fool theory Short interest theory Bicycle Theory Portfolio theory Trade theory Labor theory of value Modern portfolio theory Dow dividend theory Theory of second best Complexity Theory Dow theory Presidential election cycle theory Bubble theory New Trade Theory Game Theory Purchasing power parity theory Efficient markets theory(EMT) Product cycle theory Agency theory Dow Theory Cushion theory |
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