Science in Idaho
Financial decisions rarely follow a perfectly consistent calculation of expected return and risk. People respond to how an outcome is presented, the result they expected, the price they originally paid, and whether a change feels like a gain or a loss. Prospect Theory, developed by Daniel Kahneman and Amos Tversky, explains many of these recurring … Read More “Prospect Theory and Financial Decision-Making” »
Traditional finance often assumes that investors act rationally, process all relevant facts, and select investments that maximize expected returns for a chosen level of risk. Real trading behavior rarely fits that model perfectly. People make decisions with incomplete data, time pressure, social influence, prior experiences, and emotional responses to gains or losses. Behavioral finance studies … Read More “Behavioral Finance and Investor Psychology” »
The Efficient Market Hypothesis (EMH) is a theory explaining how financial markets process information and convert it into asset prices. It proposes that the current price of a security generally reflects the information available to market participants. If that premise is broadly correct, investors should find it difficult to earn returns above a suitable market … Read More “The Efficient Market Hypothesis” »
Portfolio theory examines how investors can combine assets to manage risk while pursuing an acceptable return. Rather than judging each investment on its own, the theory considers how shares, bonds, cash, property, and other holdings behave as a group. The central principle is fairly simple: portfolio risk may fall when assets do not rise and … Read More “Portfolio Theory and Efficient Diversification” »
Expected return and probability in finance provide a structured method for assessing uncertain outcomes. Investors cannot know an asset’s future return with certainty, but they can estimate possible results, assign probabilities to them, and calculate an average expected result. That estimate helps compare investments, set portfolio weights, evaluate trades, and decide whether the potential reward … Read More “Expected Return and Probability in Finance” »
Compound growth is a mathematical process in which an amount earns growth on its original value and on gains accumulated during earlier periods. The same principle applies to savings interest, investment returns, inflation, business revenue, population change, and unpaid debt. The defining feature is that each period’s gain becomes part of the base used for … Read More “The Mathematics of Compound Growth” »
Financial markets perform two related functions. They allow participants to buy and sell assets, and they convert incoming information into prices. Every order expresses a view, whether the trader has formed that view through detailed research, an automated signal, a need for cash, or a simple change in risk tolerance. Shares, bonds, currencies, commodities, and … Read More “How Financial Markets Process Information” »
The relationship between risk and return sits at the centre of investment analysis. Assets with higher expected returns usually expose investors to a greater chance of loss, wider price movements, uncertain income, or a longer wait before capital can be recovered. That does not mean taking more risk automatically produces more profit. A poorly judged … Read More “The Science of Risk and Return” »
Swing trading is often discussed as though profitability can be reduced to one clean statistic: what percentage of swing traders actually make money? Unfortunately, the available research does not provide a reliable universal figure. There are plenty of claims online suggesting that 5%, 10%, 20% or some other conveniently round percentage of swing traders are … Read More “Profitability of Swing Trading” »
The decision to ban binary options for retail traders was easy to understand. Regulators were looking at a market where most customers lost money, conflicts between brokers and clients were common, contracts frequently expired within minutes and fraudulent websites had become closely associated with the product. In the UK, the Financial Conduct Authority permanently prohibited … Read More “Was Banning Binary Options the Right Choice?” »
