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Finance GlossaryAutoregressive Model
Autoregressive Model
Definition of Autoregressive Model
An autoregressive model uses one or more past values to forecast the current value of an asset.
The model assumes that past values can have an impact on the current value but the number of past values it takes into account can vary.
For example, an AR(1) model will use one preceding value, an AR(2) model will use two preceding values, and so on.
The model assumes that past values can have an impact on the current value but the number of past values it takes into account can vary.
For example, an AR(1) model will use one preceding value, an AR(2) model will use two preceding values, and so on.
Related Terms
Promoter Holding
Promoter holding refers to the percentage of total shares held by the promoters of a company. Promoters are a group of individuals who are responsible for the foundation or management of the company. High promoter holding can signal strong management conviction in the future of the company, but can also lead to concerns about corporate governance and a lack of sufficient free float of shares for the public market.
Advance Payment Guarantee/Bond
An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.
The guarantee could be:
The guarantee could be:
- Primary: Indemnity (fulling payments)
- Secondary: Guarantee (assuring that the outcome will be met)
Annual Earnings Change
An Annual Earnings Change is the difference between a company’s earnings from the present and previous fiscal year. The formula for annual earnings change is:
Current Fiscal Year Earnings - Previous Fiscal Year Earnings
Say for example a liquid nitrogen manufacturing company earned Rs. 50 crores in the current fiscal year and Rs. 29 crores in the previous fiscal year. Their annual earnings change will be:
Rs. 50 crores - Rs. 29 crores = Rs. 21 crores.
Current Fiscal Year Earnings - Previous Fiscal Year Earnings
Say for example a liquid nitrogen manufacturing company earned Rs. 50 crores in the current fiscal year and Rs. 29 crores in the previous fiscal year. Their annual earnings change will be:
Rs. 50 crores - Rs. 29 crores = Rs. 21 crores.
Short Selling
Short selling is a popular intraday selling strategy. Through this strategy, traders can sell shares that they currently don’t own. They expect the prices to fall, so they borrow the shares and sell them at the current price. The goal is to buy the stock back later at a lower price. However, traders can incur significant losses if the prices rise instead. That’s why risk management is crucial in short selling.
Internal Rate Of Return
Internal Rate Of Return (IRR) is used to measure the compound annual return generated by a financial asset. IRR is a tool in Discounted Cash Flow financial analysis that operates by bringing the Net Present Value (NPV) of cash flow to zero. That’s why IRR can be used to compare a variety of financial assets from the equity market or bond market to real estate.
Working Capital
Working capital represents a company’s short-term financial health and operational efficiency, calculated as current assets minus current liabilities. For instance, a business with sufficient working capital can comfortably pay suppliers and meet day-to-day expenses, while negative working capital may indicate liquidity challenges.
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