Natural Resources (Level II 2022)
Natural resources are assets comprising commodities and raw land utilized for farming and timber. Commodities may be classified as hard or soft commodities. Hard commodities are mined or extracted. Examples of such commodities are oil, copper, and gold. On…
Private Capital
Private capital refers to investment in assets that are not available in public markets. Private capital consists of private equity and private debt. Private Equity Private equity is an investment in privately-owned or public companies with an intention to privatize…
Hedge Funds
Hedge funds employ strategies to offer their investors absolute returns (net of fees and taxes). These private funds are actively managed and employ aggressive strategies across asset classes. Characteristics of Hedge Funds Master hedge fund concepts with our Free Trial….
Alternative Investments Compensation Structures
Partnership Structures Partnerships in alternative investments typically consist of a General Partner (GP) and some Limited Partners (LPs). In this arrangement, the GP is the fund manager while the LPs are the accredited investors. The engagement of the partners is…
Methods of Investing in Alternative Investments
Methods of investing in alternative investments include: Fund Investing Fund investing is when investors contribute capital to a fund, and then the fund identifies, chooses, and makes investments on behalf of the investors. Investors pay a fee based on the…
Types and Categories of Alternative Investments
Every possible investment choice is either an alternative or a traditional investment. Traditional investments are: Traditional is neither a synonym for “common,” nor “unusual.” Therefore, alternative investments include assets such as: Alternative investments often supplement traditional investments held in a…
Behavioral Finance and Market Behaviour
Some persistent market patterns such as momentum, value, bubbles, and crashes impact market efficiency and are regarded as functions of behavioral finance. Market Anomalies Anomalies are noticeable departures from the efficient market hypothesis, as evidenced by persistently aberrant returns. For…
Behavioral Bias and Financial Decision Making
Cognitive Errors Cognitive biases, alternatively known as faulty cognitive reasoning, describe erroneous ways of thinking, reasoning, and interpreting information. Below are the two categories into which cognitive errors can be split: Belief perseverance bias. Processing errors. Practice behavioral finance questions…
Behavioral Biases: Cognitive Errors and Emotional Biases
Behavioral biases are irrational beliefs or behaviors that can influence our decision-making process. Behavioral biases may make our decisions to stray from what is prescribed or recommended, if you may, by the traditional finance theory. Behavioral bias is split into two…
Functional Forms for Simple Linear Regression
For non-linear relationships, we can use several functional forms to potentially transform the data to be used in linear regression. The following are the three often-used log transformation functional forms: Selecting the Correct Functional Form To settle on the correct…
