Investments Chapter 14: Common Stocks: Analysis and Strategy

Required rate of return

The minimum expected rate of return necessary to induce an investor to purchase a security

Risk premium

That part of a security's return above the risk-free rate of return; greater the riskier the asset is

Index funds

Mutual funds holding a bond or stock portfolio designed to mimic the performance of a particular market index

Technical analysis

The use of specific market date for the analysis of both individual and aggregate stock prices for the purpose of identifying recurring price patterns

Momentum investing

Investing on the basis of recent movements in the price of a stock, which generally means buying stocks that have outperformed the market recently (following the trend)

Fundamental analysis

The estimation of a stock's value using basic data such as its earnings, sales, risk, and so forth

Intrinsic value

The estimated or true value of a security as determined by an investor after examining a firm's underlying variables