Philstocks_stock Market Glossary (1)

8/4/2019 Philstocks_stock Market Glossary (1)

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-A-

ASSETS are basically anything having commercial or exchange value that is owned

by businesses, institutions or individuals.

-B-

A BACK END LOAD is asales charge paid when investors sell back your shares to

the fund.

BASIS POINTS are the smallest measure used in quoting yield on bills, notes and

bonds. One basis point is equivalent to 1/100th of 1%, or in other words, 1% of 1%.

100 basis points = 1% change.

BEAR TRAP occurs when bears continue to sell the market, and are forced to buy

at higher prices to cover their positions when a bear market reverses and suddenly

turns bullish.

BETA is a coefficient that measures a stocks relative volatility compared to the

market. A beta value greater than 1 is more volatile than the market. Conservative

investors whose main objective is to preserve capital should focus more on stocks

with low betas.

A stocks BID PRICE is the highest declared price at which a market maker is

willing to buy a stock from a seller.

BID-TO-COVER RATIO refers to the number of bids received in a Treasury auction

against bids accepted. A high ratio usually over 2.0 times indicates that the

bidding was aggressive and the auction was successful.

BLACK MONDAYoccurred in the 19th of October 1987 when the Dow Jones

Industrial Average plunged 508 points, reflecting investment concerns on inflated

stock prices, federal budget and trade deficits.

BOND FUNDS are mutual funds that hold bonds. Such funds specialize in particular

kinds of bonds, such as government, corporate, convertible, high-yield, mortgage-

backed, municipal, and foreign or zero-coupon bonds. Bonds also produce capital

gains, when interest rates fall and capital losses when interest rates rise.

BONDS are long-term debt securities issued by a corporation or government entity

that usually carries a fixed interest rate. A bond issuer agrees to pay the owner the

amount of the face value on a future date and to pay interest at a specified rate at

regular intervals.

The BOOK-TO-BILL RATIO refers to the ratio of orders obtained for future delivery

to orders that have been shipped immediately. This is commonly used in the

semiconductor industry to see if chip orders ar rising or falling, and at what pace.


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BOTTOM FISHERS areinvestors on the lookout for stocks that have fallen to

their bottom prices before turning up. In extreme cases, bottom fishers purchase

stocks/bonds of bankrupt or near-bankrupt firms.

A BROKER is an entity that acts as an intermediary or middleman between buyers

and sellers, and usually charging commission for commission for their services. Abroker also transacts in behalf of clients securities under Philippine laws.

A BUYBACKis apurchase of a long contract to cover a short position, usually

arising out of short sales of a commodity.

The BUYERS MARKET occurs when prices of a stock tend to fall allowing buyers to

set the price and terms of sale.

-C-

CAPITAL APPRECIATION is basically an increase in market value of a security.

A CLOSED-END MUTUAL FUND refers to an investment company that issues a

limited number of non-redeemable shares usually during an offering period (much

like an initial public offering).

COMMON STOCKrefers to units of ownership of a public corporation. Owners are

typically entitled to vote on the selection of directors and other important matters,

as well as to receive dividends on their holdings.

CONTANGO is a pricing situation in which prices of a futures contract get

progressively higher as maturities get longer. The higher prices include carrying

costs, including storage, financing and insurance.

COUNTERCYCLICAL STOCKS are stocks that tend to rise in value when the

economy is in recession. Traditionally, firms that belong to industries backed by

stable demand (e. g. food and drugs) are considered countercyclical.

The COUPON RATE isthe stated interest rate on a bond, paid by a corporation or

government entity throughout the bonds life.

CURRENT YIELD isannual interest on a bond divided by the market price. It is the

actual income rate of return as opposed to the coupon rate (the two to be held

equal if the bond were brought in at par value) or the yield to maturity.

CYCLICAL STOCKS are shares that tend to rise quickly when the economy

improves and falls when the economy declines. This usually includes housing and

automobiles, among others.

-D-

A DAY ORDER refers to posted orders good only for the days trading session.


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The DEATH VALLEY CURVE is a term used by venture capitalists to describe a

start-up firms rapid use of capital, referring to the time period before revenues

begin.

DEBENTURE is a general debt obligation backed only by the integrity of the

borrower and documented by an agreement called an INDENTURE. An unsecuredbond basically is a debenture.

A DEBT BOMB is a situation wherein a major financial institution defaults on its

obligations, causing major disruption within the domestic and sometimes global

financial system.

DIVERSIFICATION refers to the methods used tospread risk by putting assets in

several categories of investment.

DIVIDENDS are distributed earnings of shareholders paid in the form of money,

stock, or property. Among others, the amount is decided by the board of directors

and is usually paid quarterly. Dividends must be declared as income in the year

they are received.

-E-

EQUITYis considered as the ownership interest of shareholders in a company. It is

also known as stock or share.

An EQUITY FUND isa mutual fund that invests primarily in stocks.

EX-DIVIDEND RATE is the date on which a stock dividend is declared, typically

three weeks before the dividend is paid to shareholders of record.

-F-

FIXED INCOME usually refers to government, corporate, or municipal bonds, which

pay a fixed rate of interest until bonds mature, and to preferred stock paying a fixed

dividend.

FRIENDLY TAKEOVERS refer to a merger supported by management and the

board of directors of a target firm.

FRONT END LOAD is a sales charge that is incorporated into the public offering

price when an investor buys a mutual fund share.

FUNDAMENTAL ANALYSIS is a method of valuing a company by looking at the

items on its income statement and balance sheet, as well as the general status of

the economy as a whole. The ratios and calculations of fundamental analysis enable

investors to assess the intrinsic or fundamental value of a company, and

determine whether a stock is an attractive investment target.


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FUNGIBLES are securities that have not yet been settled.

-G-

GAP OPENING is when the opening price for a stock is significantly higher or lower

than the previous days closing price.

GARBATRAGE is a stock traders term, combining the words garbage and

arbitrage, for activity in stocks swept upward by the psychology surrounding a

major takeover.

GEARING is the ratio of borrowed capital against total capital employed. It is

sometimes known as leverage.

GENERAL OBLIGATION FUNDS aremunicipal bonds backed by full faith and

credit (which includes taxing and further borrowing power) of a municipality.

A GIFFEN GOOD is a good that goes against the law of demand. When prices ofGiffen goods increase demand increases instead of falling as would normally be

expected. In the same manner, when prices decrease, demand decreases as well. A

classic example would be staple foods that are bought by impoverished families

(e.g. rice) which, if prices rise, would even be consumed at a higher rate, and

diminishing their capability to buy more nutritious foods.

GLAMOR STOCKis a stock that has a wide public and institutional following. These

are firms that produce steadily rising sales and earnings over a long period of time

and move faster than market averages.

GOLDEN HANDSHAKEis a generous payment by a company to a director, seniorexecutive or consultant who is let go before any contract expires because of a

takeover or other development.

GOLDILOCKS ECONOMYwas a term coined in the 1920s to describe an economy

that was, in the words of the titular character, not too hot and not too cold. This

typically describes an economy that enjoyed steady growth with nominal rates of

inflation.

GOOD TILL CANCELLED are a brokerage customers orders to buy or sell a

security, usually at a particular price, that remains queued for seven calendar days

beginning the day they were posted.

GREENMAIL is a New York Stock Exchange term, referring to the payment of a

premium to a raider trying to take over a company via a proxy contest of other

means. By accepting the payment, the raider agrees not to buy an more shares or

pursue the takeover.


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The GROUP OF FIVE (G5) are five leading industrial nations France, Germany,

the United Kingdom, and the United States of America which meet time to time to

discuss common economic problems.

The GROUP OF SEVEN (G7), on the other hand, are seven leading non-communist

industrial nations composed of G5 members, with the addition of Canada and Italy.

Finally, the GROUP OF TEN (G10), also known as the Paris Club, includes Belgium,

the Netherlands, and Sweden along with the original G7 members. These nations

signed an accord in 1962 to increase the funds available to the IMF and aid member

countries with balance-of-payment difficulties.

GUNSLINGERS refer to aggressive portfolio managers who purchase speculative

stocks often on margin.

-H-

HAMMERING THE MARKET refers to aggressive selling of stocks by investors whothink prices are inflated.

A HIGH-YIELD BOND is a bond that usually has a rating of BB or lower and pays

higher yield to compensate for its greater risk.

HOT ISSUE is a newly issued share of a firm that has great public demand.

HUNKERING DOWN is a traders term for disposing off their big position in a stock.

HYPOTHECATION is, in banking parlance, referring to pledging of property to

secure a loan. This does not transfer the title, but only the right to sell the

hypothecated property in the event of a default

-I-

IMPAIRED CREDIT refers to the deterioration in the credit rating of a borrower,

which may lead to reduced credit financing windows from lenders.

IMPUTED INTEREST is interest considered to have been paid full in effect, even

though no interest was actually paid.

INACTIVE STOCKS are securities traded relatively infrequently. Low traded

volumes make a security illiquid and investors tend to shy away from these.

INCOME is considered asany amount in excess of the principal investment.

An INDEX is a statistical composite or benchmark that measures changes in the

economy or in the financial market. For the Philippines, the statistical index for the

stock market is the PSEi, or the Philippine Stock Exchange Index.


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INFLATION HEDGE is an investment designed to protect against the potential loss

of purchasing power as a result of inflation. Some of good inflation hedge

instruments include gold, real estate, and money market funds.

INITIAL PUBLIC OFFERING, otherwise known as an IPO, isacorporations first

offering of stock to the public.

Groups that trade large volumes of securities represent INSTITUTIONAL

INVESTORS. Some examples include mutual funds, pension funds, banks,

insurance firms, college endowment plans, among others.

INTER VIVOS TRUST is trust established between living persons. A

TESTAMENTARY TRUST goes into effect once the person who set up the trust

dies.

INVALID VOLUME happens when the Philippine Stock Exchange rejects GTC

postings if board lots change because of changes in price range.

An INVESTMENT COMPANYis a firm that pools investors money in securities

appropriate for stated investment objectives. It offers participants more

diversification, liquidity, and professional management services than would

normally be available to them as individuals.

An ISSUE refers tostocks or bonds sold by a corporation or a government entity at

a particular time.

-J-

TheJANUARY EFFECT

is a phenomenon when stocks historically tend to risemarkedly during the period beginning at the end of December and finishes on the

4th trading day of January.

The infamousJONESTOWN DEFENSE or a SCORCHED-EARTH POLICYis a term

used by overseas traders to refer to tactics taken in by management to ward off

hostile takeovers. An example case is that a firm may try to sell valuable assets or

take on a huge amount of debt to make the firm undesirable to a potential acquirer.

The term acquires its name from the infamous Jonestown mass suicide incident

perpetrated by Jim Jones in Guyana.

AJUNIOR ISSUE refers to the issuance of a debt or equity that is subordinate in

claim to another issue relative to dividend, interest, principal or security in the

event of liquidation.

Government debt that is refinanced and matures in 1-5 years through the issuance

of new securities that will mature greater than 5 years is termed asJUNIOR

REFUNDING.

-K-


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A KICKER, also pejoratively known as sweetener, is a term used for added

features of a debt obligation to improve the marketability of an offering through the

prospect of equity participation. Examples include bonds that can be converted into

shares of stock, rights and warrants.

The KONDRATIEFF WAVE theory was made by Soviet economist NikolaiKondratieff in the 1920s, where he stipulated that Western capitalist economies

were prone to major up-and-down supercycles that could last up to 50-60 years.

-L-

The LAFFER CURVE, named after US economics professor Arthur Laffer, indicates

that economic output will grow if marginal tax rates are reduced.

LAISSEZ-FAIRE, literallymeaning allow to do in French, and pronounced as

lazy-fare, is a doctrine of the capitalist system, stipulating that minimal

interference from the government in business and economic affairs will bring about

a better economy as compared to controlled economies.

LEMON INVESTMENTS are supposedly promising investments that instead

produce dismal results, thereby failing to live up to set expectations.

LEVERAGED BUYOUTS occur when a small group borrows money to finance

purchases of shares in an acquired firm. The loan is ultimately repaid using the cash

generated from the purchased firms operations or liquidation of the purchased

firms assets.

A LIABILITYis a claim on the asset of a company or individual, excluding

ownership (equity).

LIQUIDITYis the ability to buy or sell assets quickly in large volumes without

substantially affecting the asset price.

LOAD is a sales charge paid by investors who buy shares in a load mutual fund or

annuity.

-M-

The MAIN BOARD LOT refers to multiples of the board lot required to trade in the

main board. Also, required lots usually change depending on the price range of a

particular stock.

MANAGEMENT BUY-IN involves the purchase of an external investor of a

controlling interest in a firm that chooses to retain the existing management.

A MAPLE LEAF is a bullion coin minted by the Canadian government in gold, silver

and platinum, all precious metals. This bullion coin is one of the actively traded


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coins in the world along with the American Eagle, South African Kruggerand, among

others.

The MARGIN is the amount of equity required to open or maintain a position in a

given security. The term may also refer to the amount of equity required to

maintain all positions in a brokerage account.

MARKET TONE refers to the general health and strength of a securities market.

Narrow spreads or gaps between the bid and ask price indicate good market tones.

MATRIX TRADING is a form of bond swapping wherein traders take advantage of

temporary aberrations in yield spread differentials between bonds of the same

class, but with different ratings or between bonds of different classes.

MONETIZING DEBT refers to financing the local debt by printing new money,

which causes inflation.

The MONEY MARKET is a market for short-term debt instruments.

MONOPSONYis a condition when one buyer dominates the market, forcing sellers

to agree on the buyers terms. This is also the opposite of a MONOPOLY, wherein

there is only one seller of a good, and all buyers have to agree on the price of the

good that the monopolist dictates.

MUNICIPAL BONDS are debt instruments issued by local government units such

as states, municipalities, and other political subdivisions.

---------

-N-

A NARROW MARKET happens on the event that there is light trading and greater

fluctuations in prices relative to volume.

NATIONALIZATION broadly refers to a takeover of a private firms assets or

operations by the government or any public corporation/institution. For developed

countries, industries are nationalized when members strive to obtain government

subsidies to survive.

If an investor borrowed money at 10% and bought a bond with a yield of 8%, the

investor is said to be incurring a NEGATIVE CARRY in other words, the cost of thesecurity (bonds, stocks, etc) is greater than the yield (or revenue) that can be

earned.

When yields on a short-term security are higher than the long-term tenors of the

same quality, a NEGATIVE YIELD CURVE exists. Also, negative yield curves, or

inverted yield curves are said to be historically correlated to a following recession.


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OLIGOPSONYhappens when a few buyers are able to control prices by controlling

their demand. OLIGOPOLYas the opposite occurs when a few sellers control the

supply of a good or service.

Fund managers calls a stock a ONE DECISION STOCKif a stock issue has sufficient

fundamental quality fit for a buy and hold strategy.

Investors who refrain from investing due to market uncertainties are termed to be

ON THE SIDELINE. They usually keep their money on short-term financial

instruments and investments that are liquid enough to be accessed immediately

once opportunities in the stock markets arise.

OPEN-END MUTUAL FUNDS are types of mutual funds that are not restricted on

how many shares will be issued. Usually, if the demand for the fund is very high, the

fund managers will continue to issue fund shares no matter the number of

investors. In the opposite side, open-end funds will also buy back the shares readily

when the investors wish to sell their shares. Majority of the mainstream mutual

funds available in the market right now are open-end.

An OPEN OUTCRYis a term used in commodity exchange to denote the shouting

out of buy or sell offers to the market crowd.

OPTIMUM CAPACITYdenotes the level of output of manufacturing firms that

produce the lowest possible cost in producing one unit of output. In this case,

production is at its most efficient.

A stock is OUT OF LINE if the stocks price is too high or too low relative to other

stocks of similar quality.

OUTSTANDING SHARES are shares issued by a company and held by the public.

-P-

The PAC-MAN STRATEGYoccurs when a target firm to be acquired defends itself

by buying the common shares of the acquiring company. This is used to thwart any

takeover attempt.

The PAR VALUE of a security is the value assigned by an issuing corporation for its

own issued securities, namely stocks and bonds.

A PARTIALLY CANCELLED posting refers to unmatched postings that were

cancelled by customers themselves.

The PAYMENT DATE is the date on which a dividend is paid to shareholders who

purchased the stock before the ex-dividend date.

PERPETUAL or ANNUITY BONDS are bonds that have no maturity dates, are non-

redeemable and pays a steady stream of interest in an indefinite amount of time.


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A PORTFOLIO is a combined holding of different kinds of securities, usually

composed of different kinds of stocks, commodities, real estate assets and other

kinds of assets. These are held by individuals or institutional investors.

PREEMPTIVE RIGHTS refer to rights that give shareholders the ability to maintain

their percentage ownership of a corporation in the case of new issuances ofadditional shares of the same class to the public.

PREFERRED STOCKS are a class of stocks that pay dividends at specific rates.

What makes it more special is that companies place preferred stockholders priority

in payment of dividends and liquidation of assets, at the cost of lack of ownership in

the company (due to most preferred shares not giving the right to vote as owners).

These stocks are also touted as hybrids between common stocks and bonds.

The PRICE-EARNINGS RATIO (P/E) reflects the ratio between the prices of the

stock dividend against its earnings per share. The higher the P/E ratio, the more

investors are paying (signaling a more expensive stock). A high P/E ratio signifies

that the stock is in demand, or it could also signify that they are willing to pay more

to acquire the stock (despite the level of earnings that they could get from owning

the stock). In turn they will be expecting more earnings growth from holding such

stock.

-R-

RECORD DATE is a book reconciliation date on which shareholders must officially

own shares in order to be entitled to a dividend.

REPURCHASE AGREEMENTS, also called repos and buybacks, are agreements

between a seller and a buyer whereby the seller agrees to repurchase securities at

an agreed upon price within a period of time. In such cases, both parties are hoping

that prices will be on their favor, and as such, repurchase agreements are done

usually to protect themselves against price fluctuations.

RETURNS are amounts in excess of investment.

RETURN ON EQUITY (ROI) refers to the amount earned on a common stock

investment for a given period of time, expressed in percentages. ROI tells

stockholders how much of their money is being employed by the company, and how

much the company has been earning as compared to the level of equity that the

company has.

RISKis defined in finance as the measurable possibility of losing or not gaining

value. Unlike in common terms, risk is given a derivative measurement based on

may factors in order to produce a usable measure.

-S-


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SALES CHARGES are fees paid to a brokerage house by a buyer of shares.

The SANTA CLAUS RALLYphenomenon is an observed event during the dates

between the Christmas season and New Years Day wherein stock prices surge

upward. This phenomenon is somewhat related to the January effect as it precedes

the latter. There are numerous explanations attributed to the phenomenon, mostlyrelating to happier sentiments during the season, as well as the increased spending

and potentially increased company incomes due to the holiday season.

A SECTOR is comprised of a certain group of stocks usually found in one industry or

are similar enough to be considered as part of a general category.

A SECURITYis offered collateral given by a debtor to a lender to secure a loan. It is

also called collateral security.

SHAREHOLDERS are owners of one or more shares of stock in a corporation.

SHARES are units of equity in a corporation.

SHARK WATCHER is a term used by overseas companies for people or institutions

that specialize in early detection of potential takeover activities.

SLEEPERS are stocks that currently receive little investor interest but have

significant prospects or potential gains in price once it is duly given notice by the

market. They may also refer to stocks that do not receive attention yet perform well

in the market.

STOCKS represent a unit of ownership of a corporation. In owning a unit of the

corporation, stockholders therefore have a claim of ownership in the corporationsearnings and assets proportional to the amount of stocks that they hold in their

name.

The SAUCER pattern is a distinct pattern in technical charting that is produced

when a price of a security has already formed a somewhat long bottom line but has

started to move up already.

SYSTEMATIC RISKrefers to market-related risk factors affecting the market as a

whole.

-T-

The stock TICKER is a system that produces a running report of trading activity on

the stock exchange. It is also called a ticker tape due to its appearance as a

running string of data.

TRADING is the buying and selling of goods and services among companies, states

and countries.


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TREASURY BILLS are short-term securities with maturities of one year or less, and

are issued at a discount from its face value. Also called T-bills, these have tenors or

maturities of 13 weeks, 26 weeks or 52 weeks, more commonly known as 91-day,

182-day, or 364-day bills.

TREASURY BONDS are long-term debt instruments with maturities longer than 10years. They also issue coupons and may be sold at a discount, at a premium or at

par value.

TREASURY NOTES are intermediate securities with maturities of 2 to 10 years.

Also called T-notes, these have coupon rates like corporate bonds. They can be sold

in the secondary market at a discount, at a premium or at par value.

-U-

UNDERWRITERS are investment bankers or members of an underwriting group

that agree to purchase a new issue of securities from an issuer to distribute to

investors. They seek to make a profit from the underwriting spread, or the

difference between the price of the newly issued securities and the selling price

given to investors.

UNSYSTEMATIC RISKpertains to company-specific risk factors that are inherent in

each investment. An example of such risk would be the risk of employees

performing a strike which may potentially paralyze operations.

-V-

VOLUME refers to the total number of stocks shares, bonds, commodities and

futures contracts traded in a particular period.

-W-

WARRANTS are a type of security usually issued together with a bond or preferred

stock. It entitles the holder a proportionate amount of common stock at a specified

price which is usually higher than the market price at the time of issuance, for a

period of years on in perpetuity.

-Y-

YIELD refers to returns on capital investments.

YIELD TO MATURITYis a concept used to determine the rate of return that an

investor will receive if a long-term, interest-bearing investment is held until its

maturity date.

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Philstocks_stock Market Glossary (1)