What Long-Term Capital Management's failure showed — even Nobel Prize-winning models can blow up

What the disposition effect causes — investors sell winners too early and hold losers too long

The disposition effect leads to premature selling of profitable investments and delayed selling of underperforming ones

What the Flash Crash of 2010 revealed — algorithmic trading can cause extreme market swings

Algorithmic trading can trigger rapid, severe market fluctuations, as seen in the 2010 Flash Crash

What recency bias does — overweighting recent events in investment decisions

Recency bias leads investors to prioritize recent market trends over long-term historical data

What the Modigliani-Miller theorem says — in a perfect market, capital structure doesn't affect firm value

Modigliani-Miller theorem: No impact of capital structure on firm value in perfect markets

What Buffett means by 'Only when the tide goes out do you discover who's been swimming naked'

Exposes investors' lack of prudent risk management

What is the Capital Asset Pricing Model (CAPM) and how does it calculate the expected return on an investment?

CAPM: Expected return = Risk-free rate + Beta * (Market return - Risk-free rate)