The most comprehensive educational resources for finance

Preference Shares – Meaning, Types and Features

Preference shares are another type of equity securities issued by firms that combine the features of common shares as well as debt securities. Just like common shares, they do not mature, and can have features such as call and put options. However, like interest payments in debt securities, holders of preferred shares receive fixed payments

Common Equity Shares – Meaning and Features

Equity refers to the ownership interest or residual claim in the assets of a firm after all the liabilities of the firm have been paid. While referring to a firm’s balance sheet, equity refers to the capital contributed by the owners (also known as shareholders) plus any retained earnings or losses. A firm can issue

Constructing Binomial Tree to Describe Stock Price Movement

The future price movement of a stock can be approximated using a binomial tree. In a binomial tree, a stock can Let’s say the current stock price is S. The price of the stock can either move or move down. We will refer to the up movement as u and a down movement as d.

An Overview of Behavioral Finance

‘Man is a rational being’ is a hypothesis that has been proved wrong several times over. Each person has their individual rationale in what they do and this is true in the sphere of investing as well. Referred to as cognitive biases the subject of behavioral finance attempts to understand how these biases affect investment

FCFF Valuation Model in Excel

The discounted cash flow model is the most advocated model for valuing a stock. Under this model, an analyst will estimate the future cash flows for the company, and discount it with the appropriate discount rate. Traditionally, analysts have used dividends as the proxy for cash flows, hence the dividend discount model. However, the problem

Formula to Calculate Country Risk Premium

Country risk refers to the risk of a foreign country defaulting or becoming unable to pay its debt on time. Country risk is primarily concerned with investing in a foreign country, and includes various risks such as political risk, foreign exchange risk, and sovereign risk. Country risk must be taken into consideration while making investment

How to Calculate FCFF and FCFE

To value a company, one of the most popular methods is to use the discounted cash flow method. Traditionally, the dividends paid by the company are used as a proxy for the cash flows of the business. However, the dividends do not truly reflect the amount of cash flow the business can generate for its

How to Calculate Stocks Autocorrelation in Excel

Autocorrelation, also known as serial correlation or lagged correlation, explains the relationship between observations between the same variable over different periods of time. The observations are said to be independent if autocorrelation is zero. Autocorrelation is calculated as a function of mean and variance. Learn about Autocorrelation Autocorrelation has application in stock returns. We can

Free Online Course on Computational Investing

I came across this free course on Computational Investing at Coursera.com. It’s a great course for anyone interested in investing in stock markets. What you will learn? Here’s a brief of what you learn in this course: Why do the prices of some companies’ stocks seem to move up and down together while others move

Financial Intermediaries and Investor Positions in Equity Markets

This video on Equity Market Organization and Structure provides an overview of the financial intermediaries and the different types of investor positions in the equity markets as a part of the CFA Level 1 syllabus. The video covers: Financial Intermediaries Investor Positions