What Is Market Risk? Market risk is the possibility that an individual or other entity will experience losses due to factors that affect the overall performance of investments in the financial markets. Key Takeaways Market risk, or systematic risk, affects the performance of the entire market simultaneously.Market risk cannot be eliminated through diversification.Specific risk, or unsystematic
What Is Market Risk Premium? The market risk premium (MRP) is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM). CAPM measures the required rate
What Are Market Cycles? Market cycles, also known as stock market cycles, is a wide term referring to trends or patterns that emerge during different markets or business environments. During a cycle, some securities or asset classes outperform others because their business models are aligned with conditions for growth. Market cycles are the period between
What are Market Indicators? Market indicators are quantitative in nature and seek to interpret stock or financial index data in an attempt to forecast market moves. Market indicators are a subset of technical indicators and are typically comprised of formulas and ratios. They aid investors’ investment/trading decisions. Key Takeaways Market indicators are quantitative in nature
What Is Market Swoon? Market swoon is a buzzword for a dramatic, sudden decline in the overall value of the stock market. A broader event than a downtick or a downswing, a market swoon refers to the behavior of a market as a whole. Market swoon is a colloquial idiom used in the popular press to
What Are Marketable Securities Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. The liquidity of marketable securities comes from the fact that the maturities tend to be less than one year, and that the rates at which they can be bought or sold have little effect
What Is Market Access? Market access refers to the ability of a company or country to sell goods and services across borders. Market access can be used to refer to domestic trade as well as international trade, although the latter is the most common context. Market access is not the same as free trade. The ability
What Is the Market Approach? The market approach is a method of determining the value of an asset based on the selling price of similar assets. It is one of three popular valuation methods, along with the cost approach and discounted cash-flow analysis (DCF). Regardless of the type of asset being valued, the market approach
What Is a Market Average? A market average is an indexed measure of the overall price level of a given market, as defined by a specified group of stocks or other securities. A market average computes the sum of all current values of assets in the group and then divides that by the total number
What Is the Stock Market Capitalization-to-GDP Ratio? The stock market capitalization-to-GDP ratio is a ratio used to determine whether an overall market is undervalued or overvalued compared to a historical average. The ratio can be used to focus on specific markets, such as the U.S. market, or it can be applied to the global market, depending
