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The price-earnings ratio is calculated by dividing
Single Factor Model
A financial model that describes the return on a security as a function of a single factor, typically the market return, plus security-specific variations.
Risk Premium
The extra return expected by an investor for holding a risky asset instead of a risk-free asset, serving as compensation for bearing additional risk.
Arbitrage Opportunity
An arbitrage opportunity is the chance to buy an asset at a low price in one market and sell it at a higher price in another, taking advantage of the price difference for profit.
Expected Return
The anticipated amount of returns an investment is expected to generate, calculated as a weighted average of possible returns, based on their probabilities.
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