finance theories

Finance theories analyze how individuals and organizations make decisions about managing money, investments, and risk. For example, the Efficient Market Hypothesis suggests that stock prices reflect all available information, meaning it's hard to outperform the market consistently. The Time Value of Money theory indicates that money today is worth more than the same amount in the future because of earning potential. Modern Portfolio Theory recommends diversifying investments to optimize returns while minimizing risk. These theories help explain financial behaviors and guide decision-making to achieve financial goals effectively.