Tag: stocks

Capital asset pricing model (CAPM)
The capital asset pricing model (or CAPM) is a widelyused asset pricing model. Its popularity arises from its simplicity and elegance. Analysts and investors use it to forecast returns or to estimate the cost of equity. In this lesson, we’ll explain this model together with its assumptions. And, you can find a handy CAPM calculator…

Expected return, standard deviation, covariance in Excel
In this tutorial, we will explain how you can use Excel to calculate a stock’s expected return, standard deviation, and its covariance with another stock. See the last item in the Contents box below to follow this tutorial in a video format and/or download the Excel template we use. If it is an online calculator…

Seasoned equity offering
When a public firm (i.e., a firm whose shares are already listed on a stock exchange) sells shares to the public, this is known as a seasoned equity offering, or an SEO. This is contrast to an initial public offering (IPO) whereby a private firm (i.e., an unlisted firm) transforms into a public firm by…

Book building
In an initial public offering (IPO), book building is the process in which underwriters (the investment banks managing the issue) elicit indications of interest from institutional investors. Underwriters, then, use the information gathered to “build the book” and establish a demand curve with the ultimate objective of setting an offer price. Book building is by…

Total return formula and calculator
In the second lesson of our investments course, we’ll be learning about a stock’s total return and its two components: capital gains and dividend yield. Total return formula Imagine that you bought a stock a few months ago for $10 per share and the current share price is $12. Based on what we learned in…

Gross return vs net return
We begin our investments course by introducing fundamental return calculations. It’s essential to grasp the difference between gross returns and net returns from the outset. We define these two fundamental concepts below with practical examples. You might find the video tutorial at the end useful as well. Gross return Let’s suppose you bought shares of…

Portfolio risk calculator and formula
We often say that risk and return are two sides of the same coin. So, when assessing the performance of a portfolio, we need to consider its risk as well as its return. In the previous lesson, we focused on portfolio return. Now, we turn our attention to portfolio risk. Portfolio risk calculator You can…

How to calculate Jensen’s alpha in Excel
The purpose of this tutorial is to teach you to calculate Jensen’s alpha in Excel. We’ll estimate the Jensen’s alpha on Amazon (AMZN) shares using the S&P500 as the market benchmark and the 13week Tbill as the proxy of riskfree asset. Our analysis will be based on five years of monthly data (i.e., 60 observations…

How to calculate portfolio risk and return in Excel
In this tutorial, we’ll teach you how to calculate portfolio risk and return in Excel. We’ll focus on an example where we construct a portfolio of the following three stocks: Tesla (TSLA), Amazon (AMZN), and Netflix (NFLX). If you’re unfamiliar with the formulas for portfolio return and portfolio risk, we’d recommend you check the following…

Psychology of trading
The psychology of trading encompasses the emotional states and moods that traders go through during their trading activities. Emotional trading can have an adverse impact on a trader’s performance, leading to mental issues as well as financial loss. Therefore, all traders should have at least a basic understanding of how emotions influence trading activity. We’ve…