|Efficient capital market|
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Definition of Efficient capital market
Efficient capital market
A market in which new information is very quickly reflected accurately in share
Financial markets in which security prices rapidly reflect all relevant information about asset values.
an amount or percentage deducted from an equity interest to reflect lack of marketability.
model for calculating DLOM for minority interests r the discount rate
markets in which the prevailing price is determined through the free interaction of
A firm's required payout to the bondholders and to the stockholders expressed as a
Any market in which prices are in a declining trend.
An illegal market.
A market where an intermediary offers search services to buyers and sellers.
Any market in which prices are in an upward trend.
The foreign market in the United Kingdom.
Money invested in a firm.
Net result of public and private international investment and lending activities.
decision Allocation of invested funds between risk-free assets versus the risky portfolio.
An economic theory that describes the relationship between risk and
A firm's set of planned capital expenditures.
The process of choosing the firm's long-term capital assets.
Amount used during a particular period to acquire or improve long-term assets such as
The transfer of capital abroad in response to fears of political risk.
When a stock is sold for a profit, it's the difference between the net sales price of securities and
Capital gains yield
The price change portion of a stock's return.
A lease obligation that has to be capitalized on the balance sheet.
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Placing one or more limits on the amount of new investment undertaken by a firm, either
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially
Amounts of directly contributed equity capital in excess of the par value.
The debt and/or equity mix that fund a firm's assets.
A method of constructing a replicating portfolio in which the manager purchases a
Also called financial leverage ratios, these ratios compare debt to total capitalization
A table showing the capitalization of a firm, which typically includes the amount of
Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures
Interest that is not immediately expensed, but rather is considered as an asset and is then
Also called spot markets, these are markets that involve the immediate delivery of a security
Coefficient of determination
A measure of the goodness of fit of the relationship between the dependent and
An agreement between two or more countries that permits the free movement of capital
Common stock market
The market for trading equities, not including preferred stock.
Complete capital market
A market in which there is a distinct marketable security for each and every
Corner A Market
To purchase enough of the available supply of a commodity or stock in order to
A standardized statistical measure of the dependence of two random variables,
Cost of capital
The required return for a capital budgeting project.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital
A market where traders specializing in particular commodities buy and sell assets for their
The market for trading debt instruments.
Total par value (number of shares issued, multiplied by the par value of each share). Also
markets for derivative instruments.
Direct search market
Buyers and sellers seek each other directly and transact directly.
Part of a nation's internal market representing the mechanisms for issuing and trading
The organizing principle of modern portfolio theory, which maintains that any riskaverse
The combinations of securities portfolios that maximize expected return for any level of
Efficient Market Hypothesis
In general the hypothesis states that all relevant information is fully and
A portfolio that provides the greatest expected return for a given level of risk (i.e. standard
In the interbank Eurodollar deposit market, an either-way market is one in which the bid
The financial markets of developing economies.
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
The money market for borrowing and lending currencies that are held in the form of
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Also referred to as the international market, the offshore market, or, more popularly, the
Fair market price
Amount at which an asset would change hands between two parties, both having
Federal funds market
The market where banks can borrow or lend reserves, allowing banks temporarily
An organized institutional structure or mechanism for creating and exchanging financial assets.
The market for trading bonds and preferred stock.
Foreign banking market
That portion of domestic bank loans supplied to foreigners for use abroad.
Foreign bond market
That portion of the domestic bond market that represents issues floated by foreign
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
Part of a nation's internal market, representing the mechanisms for issuing and trading
Foreign market beta
A measure of foreign market risk that is derived from the capital asset pricing model.
A market in which participants agree to trade some commodity, security, or foreign
Direct trading in exchange-listed securities between investors without the use of a broker.
A market in which contracts for future delivery of a commodity or a security are bought or sold.
Purchases and sales of eurobonds that occur before the issue price is finally set.
Hard capital rationing
capital rationing that under no circumstances can be violated.
The unique capabilities and expertise of individuals.
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
Information Coefficient (IC)
The correlation between predicted and actual stock returns, sometimes used to
spread The spread between the interest rate offered in two sectors of the bond market for
Intermarket spread swaps
An exchange of one bond for another based on the manager's projection of a
The mechanisms for issuing and trading securities within a nation, including its domestic
Internally efficient market
Operationally efficient market.
Related: See external market.
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial
Intramarket sector spread
The spread between two issues of the same maturity within a market sector. For
A futures market in which the nearer months are selling at price premiums to the more
Issued share capital
Total amount of shares that are in issue. Related: outstanding shares.
Value at which a company's shares are recorded in its books.
A market is locked if the bid = ask price. This can occur, for example, if the market is
Indicator of financial leverage. Shows long-term debt as a proportion of the
Make a market
A dealer is said to make a market when he quotes bid and offered prices at which he stands
The process whereby the book value or collateral value of a security is adjusted to reflect
An arrangement whereby the profits or losses on a futures contract are settled each day.
The total dollar value of all outstanding shares. Computed as shares times current
Market capitalization rate
Expected return on a security. The market-consensus estimate of the appropriate
Total demand for loans by borrowers equals total supply of loans from lenders. The market,
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for
The period between the 2 latest highs or lows of the S&P 500, showing net performance of a
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
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