Normal Goods and Inferior Goods
[vsw id=”peZTnpzYHPg” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Normal Goods Normal goods are goods whose demand increases with an increase in consumers’ income. Note that the rate at which demand increases is lower than the rate at which income increases. The rate…
The Law of Diminishing Marginal Returns
The law of diminishing marginal returns states that the marginal return from an increased input, say labor, will decrease when this input is added continually to a fixed capital base. Example A good example is that of a factory that…
Break-even and Shut-down Point of Production
Break-even Point of Production The break-even point can be defined as the production and sales levels of a given product at which the revenue generated from the sales is perfectly equal to the production cost. At this point, the company…
Ethics and Trust in the Investment Profession
[vsw id=”azBhDSjBRS0″ source=”youtube” width=”611″ height=”344″ autoplay=”no”] Ethics Defined Many professions define a code of ethics aimed at outlining cultural values within that profession. For the investment industry, ethics are defined as a standard of conduct valued by the financial sector. These…
Code of Ethics and Standards of Professional Conduct
CFA Institute Professional Conduct Program and the Process for Enforcement of Code and Standards Violations of the CFA codes and standards are reviewed through the CFA Institute’s Professional Standards and Policy Committee (PSPC). This committee is authorized to conduct investigations…
Application of Conditional Expectations in Investments
[vsw id=”hu47ZbsskEw” source=”youtube” width=”611″ height=”344″ autoplay=”no”] The conditional expectation, in the context of investments, refers to the expected value of an investment given a certain set of real world events that are relevant to that particular investment. This means that…
Tree Diagram
[vsw id=”hu47ZbsskEw” source=”youtube” width=”611″ height=”344″ autoplay=”no”] A tree diagram is a visual representation of all possible future outcomes and the associated probabilities of a random variable. Tree diagrams are particularly useful when we have several possible outcomes. They can help…
Covariance and Correlation
Covariance Covariance is a measure of the degree of co-movement between two random variables. For instance, we could be interested in the degree of co-movement between interest rate and inflation rate. The general formula used to calculate the covariance between…
Portfolio Returns
A portfolio is basically a collection of investments held by a company, mutual fund, or even an individual investor, consisting of assets such as stocks, bonds, or cash equivalents. Financial professionals usually manage a portfolio.
