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Trade theory |
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Trade theoryThe body of economic thought that seeks to explain why and how countries engage in international trade and the welfare implication of that trade, encompassing especially the Ricardian Model, the Heckscher-Ohlin Model, and the New Trade Theory.Similar MatchesPurchasing power parity theoryPurchasing power parity theoryA theory of the exchange rate that the rate will adjust to achieve purchasing power parity, in either its absolute or its relative form. Labor theory of valueLabor theory of valueThe theory that the value of any produced good or service is equal to the amount of labor used, directly and indirectly, to produce it. Sometimes said to underlie the Ricardian Model of international trade. 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. Greater fool theoryGreater fool theoryAn investment notion that even when a stock is fully valued by conventional standards, there is room for upward movement because there are enough buyers to push prices farther upward purely on speculation or hype. Odd lot theoryOdd 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. Further SuggestionsConduit theoryElliott Wave Theory Presidential election cycle theory Dow Theory Efficient markets theory(EMT) Product cycle theory Game theory Game Theory Cushion theory Normal backwardation theory New Trade Theory Local expectations theory Portfolio theory Bicycle Theory Agency theory Dow dividend theory Complexity Theory Short interest theory capital market theory Dependency Theory Theory of second best Dow theory Expectations theory of forward exchange rates Preferred habitat theory Bubble theory |
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