Hedge Fund Primer (Investing Strategies)
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Long-Short Equity (L/S): Fund Investing
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Short Selling Process (Step-by-Step)
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Equity Financing (Preferred Shares vs. Common Shares)
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Return on Investment (ROI)
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Economic "Moat": Protection of Long-Term Profits
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All Investing Content
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Active vs. Passive Investing
Active vs. Passive InvestingWhat is Active vs. Passive Investing? Active vs Passive Investing is a long-standing debate within the investment community, with the central question being whether the returns from active management...
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Activist Investor
Activist InvestorWhat is an Activist Investor? An Activist Investor seeks to be the catalyst of a turnaround of a poorly-managed underperforming publicly traded company and profit from share price appreciation.
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Alpha (α)
Alpha (α)What is Alpha? Alpha (α) in the context of finance is a term defined as the “excess returns” from a portfolio of investments, typically comprised of equities.
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Alternative Investments
Alternative InvestmentsWhat are Alternative Investments? Alternative Investments are comprised of non-traditional asset classes, such as private equity, hedge funds, real estate, and commodities, i.e. “alternatives...
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Basis Points (bps)
Basis Points (bps)What are Basis Points? Basis Points (BPS) represent a unit of measurement for interest rates in finance and are equal to 1/100th of 1.0%. The term “basis points” is most often used when discussing the...
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Best Financial Newsletters
Best Financial NewslettersWhat are the Best Stock Market and Investment Newsletters? Financial Newsletters are the preferred option for practitioners to stay on top of the markets and be updated on current events in the digita...
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Bid-Ask Spread
Bid-Ask SpreadWhat is the Bid-Ask Spread? The Bid-Ask Spread represents the difference between the quoted ask price and the quoted bid price of a security listed on an exchange.
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Bloomberg vs. Capital IQ vs. Factset vs. Refinitiv
Bloomberg vs. Capital IQ vs. Factset vs. RefinitivFinancial data providers are a key part of a finance professional's workflow. For the investment banking analyst who needs to find historical data and forecasts to build a 3-statement model or for the...
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Capital Gain
Capital GainWhat is Capital Gain? A Capital Gain occurs when the value of an investment – typically in equity (stocks) or debt instruments – rises above the initial purchase price post-sale.
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Capital Gains Yield (CGY)
Capital Gains Yield (CGY)What is Capital Gains Yield? The Capital Gains Yield measures the percent increase or decrease in the price of a security, namely a common share.
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Chartered Financial Analyst (CFA) Guide
Chartered Financial Analyst (CFA) GuideWhat is a Chartered Financial Analyst? The Chartered Financial Analyst (CFA) designation is a globally recognized credential for investment and finance professionals. In this article, we will delve in...
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Chinese Wall
Chinese WallFINRA fined 10 large investment banks $43.5m for "failing to shield analysts from pressure to promote stocks," specifically claiming that the "investment banks promised favorable research to Toys “R”...
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Commercial Paper
Commercial PaperWhat is Commercial Paper? Commercial Paper (CP) is a form of short-term, unsecured debt, most often issued by corporates and financial institutions such as banks.
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Commodities
CommoditiesWhat are Commodities? Commodities are basic goods used for both consumption and production but also for physical exchanges and trading derivatives contracts.
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Corporate Bonds
Corporate BondsWhat are Corporate Bonds? Corporate Bonds are debt issuances by public and private companies to raise capital in exchange for periodic interest payments and the full repayment of principal at maturity...
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Cyclical Stocks
Cyclical StocksWhat are Cyclical Stocks? Cyclical Stocks are publicly traded securities characterized by share prices that fluctuate along with the prevailing macroeconomic conditions and business cycles.
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Days to Cover
Days to CoverWhat is “Days to Cover”? Days to Cover, often used interchangeably with “short interest ratio,” is the number of days necessary for all short positions to be covered, i.e. bought back by t...
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Dollar Cost Averaging (DCA)
Dollar Cost Averaging (DCA)What is Dollar Cost Averaging? Dollar Cost Averaging (DCA) is an investment strategy where rather than investing all the available capital at once, incremental investments are gradually made over time...
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Dow Jones Index (DJIA)
Dow Jones Index (DJIA)What is Dow Jones? The Dow Jones (DJIA), short for the “Dow Jones Industrial Average”, is a stock market index tracking the share price movements of thirty publicly traded, blue-chip compa...
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Efficient Market Hypothesis (EMH)
Efficient Market Hypothesis (EMH)What is the Efficient Market Hypothesis? The Efficient Market Hypothesis (EMH) theory – introduced by economist Eugene Fama – states that the prevailing asset prices in the market fully reflect all av...
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Equity Research Report Example
Equity Research Report ExampleWhat is an Equity Research Report? Sell-side equity research analysts primarily communicate their ideas through published equity research reports. In this article, we describe the typical components o...
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Equity Research vs. Sales and Trading
Equity Research vs. Sales and TradingWhat does Sales & Trading Do? Institutional investors such as pension funds, mutual funds, university endowments, as well as hedge funds use investment banks in order to trade securities. Investme...
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ESG Investing
ESG InvestingWhat is ESG Investing? ESG Investing is the commitment by retail and institutional investors to incorporate environmental, social, and governance metrics into their decision-making processes.
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Event-Driven Investing
Event-Driven InvestingWhat is Event-Driven Investing? Event-Driven Investing is a strategy wherein investors capitalize on pricing inefficiencies caused by corporate events such as mergers, acquisitions, spin-offs, and ban...
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Exchange Traded Funds (ETFs)
Exchange Traded Funds (ETFs)What are ETFs? Exchange Traded Funds (ETFs) are publicly-traded securities that tracks a specific index, sector, commodity (e.g. gold), or an underlying collection of assets.
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Expense Ratio
Expense RatioWhat is the Expense Ratio? The Expense Ratio represents the total operating costs incurred by a fund as a percentage of its average value of net assets managed.
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Fixed Income Securities
Fixed Income SecuritiesWhat is Fixed Income? Fixed Income describes securities where investors provide capital to corporations or a government for a set duration in return for regular interest payments and the original prin...
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Futures Contract
Futures ContractWhat is a Futures Contract? A Futures Contract is a financial derivative in which there is an obligation between counterparties to exchange an underlying asset at a pre-determined price on an agreed-u...
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Gold Investment
Gold InvestmentWhat is a Gold Investment? A Gold Investment in a portfolio is perceived by many investors as a hedge against inflation and recessions, hence its reputation as a “safe haven” asset class.
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Green Bonds
Green BondsWhat are Green Bonds? Green Bonds are a financing arrangement in which the issuer commits to using the proceeds to fund projects promoting the environment and sustainability.
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Hedge Fund
Hedge FundWhat is a Hedge Fund? A Hedge Fund is a pooled investment vehicle that utilizes various strategies to maximize their risk-adjusted returns across a range of asset classes.
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Holding Period Return (HPR)
Holding Period Return (HPR)What is Holding Period Return? The Holding Period Return (HPR) measures the total return earned on an investment, inclusive of the capital gain and income (e.g. dividends, interest income).
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How to Break Into Sales and Trading
How to Break Into Sales and TradingI’ve had a lot of people ask me how to break into sales and trading. I’ve mentored both current students and mid-office professionals looking to move onto a job on the trading floor. I’ve interviewed...
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Information Ratio
Information RatioWhat is the Information Ratio? The Information Ratio quantifies the excess portfolio returns over the returns of a benchmark, relative to the volatility of the excess returns. In short, the informatio...
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InsurTech Guide
InsurTech GuideWhat is InsurTech? InsurTech describes the emergence of innovative technologies built to improve the cost-efficiency and effectiveness of the traditional insurance sector.
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Jensen’s Measure
Jensen’s MeasureWhat is Jensen’s Measure? Jensen’s Measure quantifies the excess returns obtained by a portfolio of investments above the returns implied by the capital asset pricing model (CAPM).
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Largest Institutional Investors
Largest Institutional InvestorsInstitutional investors represent a part of the financial markets known as the "buy side." (Learn more: Sell Side vs. Buy Side). Below is a list of the largest institutional investors in 2017. Click h...
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Long-Short Equity
Long-Short EquityWhat is Long-Short Equity? Long-Short Equity is an investing strategy comprised of taking long positions on publicly-traded equities anticipated to rise in share price, paired with short-selling to mi...
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Maintenance Margin
Maintenance MarginWhat is Maintenance Margin? The Maintenance Margin, or “variation margin,” is the minimum amount of equity that must be maintained in a margin account before a margin call is issued due to...
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Margin Call Price
Margin Call PriceWhat is the Margin Call Price? The Margin Call Price refers to the minimum equity percentage expected to be held in a margin account before resulting in a margin call.
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Margin of Safety
Margin of SafetyWhat is the Margin of Safety? The Margin of Safety represents the downside risk protection afforded to an investor when the security is purchased significantly below its intrinsic value.
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Market Volatility
Market VolatilityWhat is Market Volatility? Market Volatility describes the magnitude and frequency of pricing fluctuations in the stock market and is most often used by investors to gauge risk by helping to predict f...
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Municipal Bonds
Municipal BondsWhat are Municipal Bonds? Municipal Bonds (or “munis”) are debt issuances by city, county, and state government entities to fund capital projects such as universities, hospitals, and infrastructure (e...
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Mutual Funds
Mutual FundsWhat is a Mutual Fund? Mutual Funds are a pooled collection of investments in stocks, bonds, and other financial instruments that are overseen by a team of fund managers and research analysts.
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Net Asset Value (NAV)
Net Asset Value (NAV)What is Net Asset Value? Net Asset Value (NAV) estimates the market value of an investment fund, namely mutual funds, and is equal to the total value of assets held minus the total liabilities.
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Random Walk Theory
Random Walk TheoryWhat is the Random Walk Theory? The Random Walk Theory assumes price movements in the stock market are not predictable since they are determined by unexpected events with no correlation to the past.
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Return on Investment (ROI)
Return on Investment (ROI)What is ROI? The Return on Investment (ROI) measures the profitability of an investment by comparing the net profits received at exit to the original cost of the investment.
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Reverse Stock Split
Reverse Stock SplitWhat is a Reverse Stock Split? A Reverse Stock Split is performed by companies attempting to increase their share price by reducing the number of shares in circulation.
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S&P 500 Index (SPX)
S&P 500 Index (SPX)What is S&P 500? The S&P 500 Index is a market capitalization-weighted index tracking the share price movements and performance of ~500 large-cap U.S. equities.
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Sales and Trading Career Path & Exit Opportunities
Sales and Trading Career Path & Exit OpportunitiesSales and trading offer a lucrative career path, with ample and structured opportunities for internal promotion opportunities. The career progression for S&T professionals is as follows (most juni...
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Sales and Trading Day in the Life
Sales and Trading Day in the LifeA day in the life of a rates trading analyst Follow along for a typical day of a first year Rates Trading Analyst on the Interest Rate Swaps Desk in New York. Rates Trading sits within Fixed Income an...
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Sales and Trading: Roles and Asset Classes
Sales and Trading: Roles and Asset ClassesWhat are the Key Roles in Sales and Trading? Although we call it Sales & Trading, there are more Front Office Sales & Trading jobs that aren’t technically sales or trading. Front Office...
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Securities Industry Essentials (SIE) Exam
Securities Industry Essentials (SIE) ExamIntroduction to the Securities Industry Essentials (SIE) Beginning October 1, 2018, FINRA will overhaul the format of its regulatory exams: A new general knowledge exam called the Securities Industry...
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Security Market Line (SML)
Security Market Line (SML)What is Security Market Line? The Security Market Line (SML) is a graphical representation of the capital asset pricing model (CAPM), which reflects the linear relationship between a security’s...
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Sell-Side vs Buy-Side Equity Research
Sell-Side vs Buy-Side Equity Research[caption id="attachment_21806" align="alignright" width="280"] Institutional Investor declared JPM, BAML and Evercore ISI 2017's top 3 sell side research teams in it's annual survey[/caption] Sell-Sid...
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Series 7 Exam: What to Expect and How to Prepare
Series 7 Exam: What to Expect and How to PrepareOverview of the Series 7 Exam [caption id="attachment_21946" align="alignright" width="450"] Ben Affleck wants to know if anyone here has passed the Series 7 exam?[/caption] The Series 7 exam, also ca...
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Sharpe Ratio
Sharpe RatioWhat is Sharpe Ratio? The Sharpe Ratio formula measures the risk-adjusted return of a portfolio by dividing the excess returns by the standard deviation of the portfolio returns.
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Short Interest
Short InterestWhat is Short Interest? Short Interest (%) is the percentage of a particular company’s total stock float that has been shorted, i.e. short-positions that have not yet been covered or closed.
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Short Selling
Short SellingWhat is Short Selling? Short Selling is a position in which an investor sells borrowed securities from a brokerage in the open market, expecting to repurchase the borrowed securities at a lower price.
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Short Squeeze
Short SqueezeWhat is a Short Squeeze? A Short Squeeze occurs when securities with a significant short interest rise sharply in value, which further accelerates the upward price movement from short-sellers closing...
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Sortino Ratio
Sortino RatioWhat is the Sortino Ratio? The Sortino Ratio is a variation of the Sharpe ratio used to measure the risk-adjusted return on a portfolio that compares performance relative to the downside deviation, ra...
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Stock Split
Stock SplitWhat is a Stock Split? A Stock Split occurs when a publicly-traded company’s board of directors decides to separate each outstanding share into multiple shares.
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Tiger Cubs
Tiger CubsWhat are the “Tiger Cubs”? Tiger Cubs describe the hedge funds that were founded by the former employees of Julian Robertson’s firm, Tiger Management. Before the firm was shut down, Tiger Management w...
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Trade Execution
Trade ExecutionS&T: An Insider's View I stumbled into a Wall Street Trading floor having no idea what a Wall Street Trader actually does. I struggled to find any good information online or in books. I signed up...
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Treasury Inflation-Protected Securities (TIPS)
Treasury Inflation-Protected Securities (TIPS)What are Treasury Inflation-Protected Securities (TIPS)? Treasury Inflation-Protected Securities (TIPS) are designed to be indexed to changes in inflation as a form of risk protection from the adverse...
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Treasury STRIPS
Treasury STRIPSWhat are Treasury STRIPS? Treasury STRIPS are zero-coupon bonds sold for less than par and pay no interest because the cash flow component was carved out to be separately traded in the secondary marke...
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Treynor Ratio
Treynor RatioWhat is the Treynor Ratio? The Treynor Ratio measures a portfolio’s excess return per unit of systematic risk, i.e. the market volatility of the portfolio. Often referred to as the “reward-to-volatili...
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Ultimate Guide to Sales and Trading
Ultimate Guide to Sales and TradingWhat is Sales & Trading? Sales and trading refers to the division of an investment bank responsible for making markets in stocks, bonds, and derivatives. Salespeople work with asset managers, hedg...
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Want to Know How a Hedge Fund Manager Picks a Stock to Short?
Want to Know How a Hedge Fund Manager Picks a Stock to Short?How Do Hedge Funds Short Stocks? In a recent article, I posted an investment banking pitchbook to give you a sense of what these bad boys actually look like. If you were thoroughly under-impressed by...
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Warren Buffett on EBITDA
Warren Buffett on EBITDAWhy does Warren Buffett dislike the EBITDA metric? While EBITDA is among the most widely used metrics in corporate finance, it receives widespread criticism, with Warren Buffett being one of the most...
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