An odd lot is a securities trade made for less than the normal trading unit. If you are talking about stocks, an odd lot would generally be a trade of less than 100 shares. The number differs for other types of securities, though. In some cases, because of the size of the order, odd lot …
Continue reading "What is an odd lot?"In these modern times of electronic trading and credit default swaps, it sometimes feels hard for the average person to figure out where the economy is going. There are a number of economic indicators that the average person can try to wrap their head around, such as international trade and construction spending. Well, in Alan …
Continue reading "What can men’s underwear tell us about the state of the economy?"A business can have a number of different possible capital structures. A firm’s capital structure is defined as “mix of a company’s long-term debt, specific short-term debt, common equity and preferred equity.(source)” In the paper “The Cost of Capital, Corporation Finance and the Theory of Investment”, Franco Modigliani and Merton Miller stated that if you consider two …
Continue reading "What are Modigliani and Miller Proposition I and Proposition II?"We are a few weeks into the series of finance-related posts. I figured I would explain this series a little before we go into today’s topic. I am currently working on an Masters of Business Administration at Cardinal Stritch University, in Glendale, WI. As I go through my homework, I often find that the textbook …
Continue reading "What is the Weighted Average Cost of Capital?"According to investopedia, a normal distribution is “a probability distribution that plots all of its values in a symmetrical fashion and most of the results are situated around the probability’s mean”. If a firm’s returns are normally distributed, it means that if you create a histogram of a company’s returns, over a larger period of time, the histogram would …
Continue reading "What does it mean for a stock to be normally distributed?"Two weeks ago, we learned about a company’s beta. Last week, we used the company’s beta when we learned about the capital asset pricing model. This week, we are going to take things a little further. In today’s post, we are going to be talking about the cost of equity. Investopedia states that “a firm’s …
Continue reading "What is the cost of equity?"Last week, we talked about what a company’s beta is. I figured that this week, we would learn about the Capital Asset Pricing Model (CAPM). According to Investopedia, the CAPM is “a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.” According to the third edition of …
Continue reading "What is the capital asset pricing model?"This is a topic that I recently dealt with within an assignment for class. Investopedia defines a company’s beta as “a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.” According to the third edition of Corporate Finance: Core Principles & Applications, when you …
Continue reading "What is a company’s beta?"