Multiple factor models
Hi there! Have you ever tried solving a puzzle with different pieces? Sometimes, it's easier to solve it if you have more than one clue or factor.
Well, the same thing goes for understanding a company's value or how its stock price changes over time. You see, there are many things that can affect it, like how much money it makes, how much debt it has, how its industry is doing, and even things like the weather or political events.
So, to try and figure out all these factors, people use something called "multiple factor models" or "multifactor models." These models kinda look like puzzles too, but instead of pieces they have something called "variables" or "factors."
Each factor is like a clue that helps explain why a company's value or stock price changes. For example, one factor could be how much money the company makes, another could be how much debt it has, and a third could be how its industry is doing.
People who use multiple factor models try to figure out which factors are the most important for each company or industry, and then use these factors to predict what might happen next.
So, in summary, multiple factor models are like puzzles that help people understand all the different things that could affect a company's value or stock price, by using different factors or clues to try and solve the puzzle.
Well, the same thing goes for understanding a company's value or how its stock price changes over time. You see, there are many things that can affect it, like how much money it makes, how much debt it has, how its industry is doing, and even things like the weather or political events.
So, to try and figure out all these factors, people use something called "multiple factor models" or "multifactor models." These models kinda look like puzzles too, but instead of pieces they have something called "variables" or "factors."
Each factor is like a clue that helps explain why a company's value or stock price changes. For example, one factor could be how much money the company makes, another could be how much debt it has, and a third could be how its industry is doing.
People who use multiple factor models try to figure out which factors are the most important for each company or industry, and then use these factors to predict what might happen next.
So, in summary, multiple factor models are like puzzles that help people understand all the different things that could affect a company's value or stock price, by using different factors or clues to try and solve the puzzle.