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Understand stock price as a forecast
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Pattern of City Size – Zipf’s Law
Rank-Size Rule (also known as Zipf’s Law) states that a city’s population size tends to be proportional to the largest city’s population divided by the city’s rank (its […]
The DiPasquale-Wheaton 4-Quadrant Diagram
The Four Quadrants Diagram illustrates the system of forces in the real estate sector. The interaction between the development sector, the capital market, and the space market creates […]
Economic Base of the Growth of Cities
To assess the growth potential of a city, an analysis of its economic base is employed. What does this entail? The economic base of a city is divided […]
TWR VS IRR
To evaluate real estate, TWR (Time-Weighted Return) is often used instead of IRR (Internal Rate of Return). TWR represents the geometric mean of returns derived from operational income […]
Real Estate: Diversification & Inflation Hedge
Diversification is often a key factor driving investment in real estate. The charts below illustrate the efficient frontiers of two portfolios for the period 1978-2009. On the vertical […]
Disposition of Real Estate
As with any other income-generating asset, replacing real estate makes sense only if the funds obtained from selling it can be invested in another asset with better returns […]
Dividends Irrelevance
Does it matter if you purchase an Income stock or a Growth stock? Does a company’s decision to distribute dividends or reinvest earnings impact the stock price? The […]
Pitfalls of IRR
Do You Use IRR to Evaluate Projects? Consider This: Many financial professionals use the Internal Rate of Return (IRR) for project evaluation, but it can be highly misleading. […]
A+B = (A+B)
Should an Organization Diversify into Different Business Areas? This question is crucial because one of the fundamental principles in financial theory is the principle of value additivity, which […]
Diversification
How Does Diversification Reduce Risk? In finance, risk refers to the range of deviation from the forecasted or expected returns. This range is often based on historical statistics […]
Market Risk
In the previous entry, I discussed how diversification can reduce an organization’s specific risks and mentioned that diversification cannot influence overall systemic, or market, risks. Imagine we have […]
Risk & Return
Ideas on Risk and Return The ideas about risk and return belong to Harry Markowitz, who published his work back in 1952. It is said that it didn’t […]
Financial Risk
How is Portfolio Risk Calculated? In the previous entry, I discussed the essence of diversification. Now let’s take a look at specific formulas, as shown in the image. […]
Project vs Organizational Risk
Factors Influencing Systemic Risk of a Project and How It May Differ from an Organization’s Systemic Risk When a specific project differs from the core operations of an […]
Certainty Equivalent
Valuation models for derivative assets hold the same significance in finance as relativity theories do in physics… In this entry, I want to address the method of discounting […]
CAPM-Model
Why is Understanding the CAPM Model Crucial for Senior Management? Given that the main task of management, particularly strategic financial management, is to increase the value of the […]
CAPM Pitfalls-1
If you plan to profit from investing in stocks, take a close look at this graph. The graph highlights two significant phenomena that the Capital Asset Pricing Model […]