Equity valuation models, market efficiency concepts, and industry analysis frameworks tested on CFA Level 1.
38 cards · basic cards · AI-written, checked twice. Edit anything.
- What does the Dividend Discount Model (DDM) calculate?
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The intrinsic value of a stock based on the present value of expected future dividend payments.- What does a Price-to-Earnings ratio of 15 mean?
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An investor pays $15 for every $1 of annual earnings the company generates.- What is Free Cash Flow to Equity (FCFE)?
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The cash available to common shareholders after operating expenses, taxes, debt repayment, and capital expenditures.- What does the PEG ratio adjust for in the P/E multiple?
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The company's expected earnings growth rate.- What is terminal value in a DCF model?
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The value of a company's expected cash flows beyond the explicit forecast period, typically calculated using the Gordon Growth Model.- What is the Residual Income Model?
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A valuation method that values a company as book value plus the present value of expected future excess profits over cost of equity.- When is asset-based valuation most appropriate?
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For asset-intensive companies, liquidation scenarios, or companies with predictable asset values (utilities, real estate, banks).- What is relative valuation?
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Valuing a stock by comparing its price multiples to similar companies or market averages.- What are the three forms of market efficiency?
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Weak, semi-strong, and strong form efficiency.- What information is reflected in weak-form efficiency?
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All past price and volume data, but not public or private information.- What information is reflected in semi-strong efficiency?
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All public information and all historical price/volume data, but not private (insider) information.- What does strong-form efficiency assume?
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All information, both public and private, is reflected in stock prices, so no investor can earn abnormal returns.- What is an anomaly in the context of market efficiency?
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A pattern or anomaly in stock returns that cannot be explained by market efficiency or standard risk models.- What is the January effect?
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An observed tendency for stock prices to rise disproportionately in January, possibly due to tax-loss selling reversal.- What is the value premium?
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The historical tendency for value stocks (low P/E, high P/B) to outperform growth stocks over long periods.
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