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Definition of Stock market

Stock Market Image 1

Stock market

Also called the equity market, the market for trading equities.



Related Terms:

Common stock market

The market for trading equities, not including preferred stock.


Bear Market

A prolonged period of falling stock market prices.


Beta coefficient

A measurement of the extent to which the returns on a given stock move with stock market.


Bourse

A term of French origin used to refer to stock markets.


Bull Market

A prolonged period of rising stock market prices.



Country selection

A type of active international management that measures the contribution to performance
attributable to investing in the better-performing stock markets of the world.


Equity cap

An agreement in which one party, for an upfront premium, agrees to compensate the other at
specific time periods if a designated stock market benchmark is greater than a predetermined level.


Stock Market Image 2

Equity floor

An agreement in which one party agrees to pay the other at specific time periods if a specific
stock market benchmark is less than a predetermined level.


Equity market

Related:stock market


Index option

A call or put option based on a stock market index.


market portfolio

Portfolio of all assets in the economy. In practice a broad stock market index, such as the Standard & Poor's Composite, is used to represent the market.


market risk

Economywide (macroeconomic) sources of risk that affect the overall stock market. Also called systematic risk.


Market timer

A money manager who assumes he or she can forecast when the stock market will go up and down.


price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)

This key ratio equals the current market price
of a capital stock share divided by the earnings per share (EPS) for the
stock. The EPS used in this ratio may be the basic EPS for the stock or its
diluted EPS—you have to check to be sure about this. A low P/E may signal
an undervalued stock or may reflect a pessimistic forecast by
investors for the future earnings prospects of the business. A high P/E
may reveal an overvalued stock or reflect an optimistic forecast by
investors. The average P/E ratio for the stock market as a whole varies
considerably over time—from a low of about 8 to a high of about 30.
This is quite a range of variation, to say the least.


Publicly traded assets

Assets that can be traded in a public market, such as the stock market.


Small-firm effect

The tendency of small firms (in terms of total market capitalization) to outperform the
stock market (consisting of both large and small firms).


Stock Market Image 3

Stock

Units of ownership, also called shares, in a public corporation. Owners of such units, called shareholders, share in the earnings of the company through dividends. The price of a stock is determined by supply and demand in the stock market.


Weekend effect

The common recurrent low or negative average return from Friday to Monday in the stock market.



Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock.


Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.


American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.


Auction markets

markets in which the prevailing price is determined through the free interaction of
prospective buyers and sellers, as on the floor of the stock exchange.


Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.


Bear market

Any market in which prices are in a declining trend.


bear market

A market in which stock or bond prices are generally
falling.


Beta equation (Stocks)

The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock


Black market

An illegal market.


BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(stockholders’ equity) / (Common stock shares outstanding)



Brokered market

A market where an intermediary offers search services to buyers and sellers.


Bull market

Any market in which prices are in an upward trend.


bull market

A market in which stock or bond prices are generally rising.


Bulldog market

The foreign market in the United Kingdom.


Capital market

The market for trading long-term debt instruments (those that mature in more than one year).


Capital market

The market in which investors buy and sell shares of companies, normally associated with a stock Exchange.


Capital Market

A market that specializes in trading long-term, relatively high risk
securities


Capital Market

The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.


Capital market efficiency

Reflects the relative amount of wealth wasted in making transactions. An efficient
capital market allows the transfer of assets with little wealth loss. See: efficient market hypothesis.


Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.


Capital market line (CML)

The line defined by every combination of the risk-free asset and the market portfolio.


capital markets

markets for long-term financing.


capital stock

Ownership shares issued by a business corporation. A business
corporation may issue more than one class of capital stock shares.
One class may give voting privileges in the election of the directors of the
corporation while the other class does not. One class (called preferred
stock) may entitle a certain amount of dividends per share before cash
dividends can be paid on the other class (usually called common stock).
stock shares may have a minimum value at which they have to be issued
(called the par value), or stock shares can be issued for any amount
(called no-par stock). stock shares may be traded on public markets such
as the New York stock Exchange or over the Nasdaq network. There are
about 10,000 stocks traded on public markets (although estimates vary
on this number). In this regard, I find it very interesting that there are
more than 8,000 mutual funds that invest in stocks.


Capital Stock

The total amount of plant, equipment, and other physical capital.


Cash markets

Also called spot markets, these are markets that involve the immediate delivery of a security
or instrument.
Related: derivative markets.


Common market

An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services.


Common stock

These are securities that represent equity ownership in a company. Common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.


Common stock

Shares of ownership sold to the public.


Common Stock

A financial security that represents an ownership claim on the
assets and earnings of a company. This claim is valid after the
claims of the debt providers and preferred stockholders have been
satisfied.


common stock

Ownership shares in a publicly held corporation.


Common Stock

That part of the capital stock of a corporation that carries voting rights and represents
the last claim on assets and dividends.


Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.


Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.


Common stock ratios

Ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.


Complete capital market

A market in which there is a distinct marketable security for each and every
possible outcome.


Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.


Consigned stocks

Inventories owned by a company, but located on the premises
of its agents or distributors.


Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.


Convertible preferred stock

Preferred stock that can be converted into common stock at the option of the holder.


Corner A Market

To purchase enough of the available supply of a commodity or stock in order to
manipulate its price.


Cost of Common Stock

The rate of return required by the investors in the common stock of
the company. A component of the cost of capital.


Cost of Preferred Stock

The rate of return required by the investors in the preferred stock of
a company. A component of the cost of capital.


Cumulative preferred stock

Preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.


Dealer market

A market where traders specializing in particular commodities buy and sell assets for their
own accounts.


Debt market

The market for trading debt instruments.


Departmental stocks

The informal and frequently unauthorized retention of excess inventory on the shop floor, which is used as buffer safety stock.


Derivative markets

markets for derivative instruments.


Direct search market

Buyers and sellers seek each other directly and transact directly.


Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.


Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.


DLOM (discount for lack of marketability)

an amount or percentage deducted from an equity interest to reflect lack of marketability.


Domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign market.


Earnings per share of common stock

How much profit a company made on each share of common stock this year.


Efficient capital market

A market in which new information is very quickly reflected accurately in share
prices.


efficient capital markets

Financial markets in which security prices rapidly reflect all relevant information about asset values.


Efficient Market Hypothesis

In general the hypothesis states that all relevant information is fully and
immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium
rate of return. In other words, an investor should not expect to earn an abnormal return (above the market
return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis
exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all
publicly available information) and strong form (stock prices reflect all relevant information including insider
information).


Efficient Markets Hypothesis

The hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security.


Either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid
and offered rates are identical.


Emerging markets

The financial markets of developing economies.


Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.


Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.


Employee Stock Ownership Plan (ESOP)

a profit-sharing compensation program in which investments are made in
the securities of the employer


Employee Stock Ownership Plan (ESOP)

A fund containing company stock and owned by employees, paid for by ongoing contributions by the employer.


Equilibrium market price of risk

The slope of the capital market line (CML). Since the CML represents the
return offered to compensate for a perceived level of risk, each point on the line is a balanced market
condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a
unit change in risk.


Eurocurrency market

The money market for borrowing and lending currencies that are held in the form of
deposits in banks located outside the countries of the currencies issued as legal tender.


Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.


Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.


External market

Also referred to as the international market, the offshore market, or, more popularly, the
Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors
in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: internal
market


Fair market price

Amount at which an asset would change hands between two parties, both having
knowledge of the relevant facts. Also referred to as market price.


Fair market value

The price that an asset or service will fetch on the open market.


Fair Market Value

The highest price available, expressed in terms of cash, in an open and unrestricted market between informed, prudent parties acting at arm's length and under no compulsion to transact.


Farm Improvement and Marketing Cooperatives Loans Act

See here


Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.


Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.


Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.


financial markets

markets in which financial assets are traded.


Fixed-income market

The market for trading bonds and preferred stock.


Floor stocks

Low-cost, high-usage inventory items stored near the shop floor,
which the production staff can use at will without a requisition and which are
expensed at the time of receipt, rather than being accounted for through a formal
inventory database.


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
companies to governments.


Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.



 

 

 

 

 

 

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