It’s been said that death and taxes are the only certain things in life. Income tax – on all levels – is the government’s chief means of generating revenue. It is also the most complex of all subjects, due to confusing law verbiage and the vastness of the Internal Revenue Service Code which never seems to decrease in volume.
Let's look into the institutional arrangements for equity trading. After all, from our corporate perspective, stocks are more interesting than many other financial instruments, such as foreign government bonds, even if there is more money in foreign government bonds than in corporate equity.
Savings for some future event, at its most basic level, is the disciplined act is putting money in some vehicle that will give a return on one’s investment. It can be as simple as a savings passbook account or CD, or as complex as bonds, notes and mortgages. The more complex the vehicle, the more the return and risk vary.
The presence of regularly occurring anomalies in conventional economic theory was a big contributor to the formation of behavioural finance. These so-called anomalies, and their continued existence, directly violate modern financial and economic theories, which assume rational and logical behaviour.
Standard finance stand on the arbitrage principles of Miller & Modigliani, the portfolio principles of Markowitz, the capital asset pricing theory of Sharpe, Lintner & Black, and the option-pricing theory of Black, Scholes & Merton.
These approaches consider markets to be efficient and are highly normative and analytical.