The whole-dollar price of a bid or offer is referred to as the handle (e.g., if a security is quoted at 101.10 bid and 101.11 offered, 101 is the handle. In this example, the market is then simply quoted as 'ten to eleven', as in '.10 to .11'.) Traders are assumed to know the handle. See: Full.
Usually refers to callable bonds. The period of time when a bond cannot be called, no matter what the interest rate is. That is, if the interest rate falls sharply, most callable bonds will be called (so the bond issuer can reissue at a lower interest rate). Hard call protection ensures that the holder of the bond can benefit when rates fall.
Commonly known as Harmonized System. It is a classification system devised by the Customs Cooperation Council to provide uniformity in tariff classification, trade statistics, and transport documentation among cooperating countries.
Often used in risk arbitrage. Antitrust act administered by U.S. Department
of Justice and the FTC that requires an investor
to file a form with the government before he acquires an economic interest
in the lesser amount of $15 million or 15% of the capitalization of a specific
security. The government has thirty days
to respond to the filer.
An aggressive tone. For example, if the Federal Reserve uses hawkish language to describe the threat of inflation, one could reasonably expect stronger actions from the Fed. There is a similar application to CEO describing an important issue that a firm faces. Opposite of Dovish.
In technical analysis, a pattern that results where a stock price reaches a peak and declines; rises above its former peak and again declines; and rises a third time but not to the second peak, and then again declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical analysts generally consider a head and shoulders formation to be a very bearishindication, especially if the market descends more than 3% below the neckline.
Developed countries such as the U.S., Europe, the U.K., and Japan that display the type of investment risks traditionally associated with emerging markets due to high leverage levels. This is a new acronym created after 2008 financial crisis to describe shifting global economic fortunes.
An investment vehicle that somewhat resembles a mutual fund, but with a number of important differences. If the fund is "off-shore", the fund does not have to adhere to any SEC regulations (and can only sell to non-U.S. investors or investment vehicles). These funds employ a number of different strategies that are not usually found in mutual funds. The term "hedge" can actually be misleading. The traditional hedge fund is actually hedged. For example, a fund employing a long-short strategy would try to select the best securities for purchase and the worst for short sale. The combination of longs and short provides a natural hedge to market-wide shocks. However, much more common are funds that are not hedged. There are funds that are long-biased and short-biased. There are funds that undertake high frequency futures strategies, sometimes called managed futures. There are funds that take long-term macroeconomic bets, sometimes called global macro. There are funds that try to capitalize on merger and acquisitions. Another distinguishing feature of hedge funds is the way that managers are rewarded. There are two fees: fixed and variable. The fixed fee is a percentage of asset under management. The variable or performance fee is a percentage of the profit of the fund. There are also funds of funds which invest in a portfolio of hedge funds. Another important difference with hedge funds is that the minimum required investment is usually quite large and, as a result, minimizes the participation of retail investors.
An investor sells a portion of a stock holding short a tender offer in the anticipation that not all shares tendered will be accepted. For example, investor Q has 5000 shares of XYZ. An acquiringcompany makes a tender offer of $100 a share for 50% of the target company when the shares are currently worth $80. Investor Q anticipates that if he or she tenders all 5,000 shares, only 2,500 will be accepted by the bidder pro rata. Investor Q therefore short-sells 2500 shares after the announcement and the price of the stock has approached $100. Company XYZ purchases only 2500 of the original shares at $100. Investor Q has sold all shares at $100 even as the price of the stock drops on a post-news dip.
The Helsinki Exchanges (HEX Ltd., Helsinki Securities and Derivatives Exchange and Clearing House) was formed at the beginning of 1998 following the merger of the Helsinki Stock Exchange Ltd. and SOM Ltd., the Securities and Derivatives Exchange, and the Clearing House.
A theory that stock prices move in the same direction as the hemlines of women's dresses. For example, short skirts (1920s and 1960s) are symbolic of bullishmarkets and long skirts (1930s and 1940s) are symbolic of bearishmarkets.
A measure of market concentration, it depends on the number of firms and their size relative to the market. It is calculated by summing up the squares of market shares of each firm. For example, a market where the HHI comes to more than 1800 will be considered a concentrated market. Mergers or acquisitions that change the HHI by more than 100 points in a concentrated market may raise antitrust concerns within the Department of Justice.
High-priced and highly speculative stock that moves up and down sharply over a short period. Generally glamorous in nature due to the capital gains potential associated with them; also used to describe any high-priced stock. Antithesis of sleeper.
Refers to computerized trading using proprietary algorithms. There are two types high frequency trading. Execution trading is when an order (often a large order) is executed via a computerized algorithm. The program is designed to get the best possible price. It may split the order into smaller pieces and execute at different times. The second type of high frequency trading is not executing a set order but looking for small trading opportunities in the market. It is estimated that 50 percent of stock trading volume in the U.S. is currently being driven by computer-backed high frequency trading. Also known as algo or algortihmic trading.
A technical indicator that purportedly predicts a bear
market or a crash when there is a large number of 52 weeks highs and 52
week lows on the NYSE. There is disagreement on the threshold. Some say
2.5% or 2.8% of issues traded on NYSE in a day. Named after the German
zeppelin that caught fire on May 6, 1937.
To maintain ownership of a security over a long period of time. "Hold" is also a recommendation of an analyst who is not positive enough on a stock to recommend a buy, but not negative enough on the stock to recommend a sell.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can duplicate the effects of corporate leverage on their own. Thus, if levered firms are priced too high, rational investors will simply borrow on personal accounts to buyshares in unlevered firms.
The process of dividing each expense item of a given year by the same expense
item in the base year. It allows assessment of changes in the relative importance
of expense items over time and the behavior of expense items as sales change.
The required return in capital budgeting. For example, if a project has an expected rate of return higher than the hurdle rate, the project may be accepted. Also, the rate of current return an income trust must earn consistently in order for it to be able to maintain distributions at their current level.
Used to characterize a lagging effect. Firms may fail to enter markets that appear attractive, or firms that are once invested in a market may persist in operating at a loss. The effect is characteristic of investments with high entry and exit costs along with high uncertainty.