Investment Terms
Dow Jones Industrial Average (DJIA): The Dow Jones
Industrial Average Index (DJIA) is a price-weighted average
of 30 actively traded blue chip stocks, primarily industrials
but including American Express, AT&T, and as of 2000,
Microsoft. Prepared and published by Dow Jones & Co.,
it is the oldest and most widely quoted of all the market
indicators. The components, which change from time to time,
represent between 15 and 20 percent of the market value of
NYSE stocks. The DJIA is calculated by adding the closing
prices if the component stocks and by using a divisor that
is adjusted for splits and stock dividends equal to 10 percent
or more of the market value of an issue, as well as substitutions
and mergers. The average is quoted in points, not in dollars.
IPO: A company's first sale of stock to the public.
Companies making an IPO are seeking outside equity capital
and a public market for their stock.
Earnings: Income of a business (revenue minus expenses).
Earnings per share or EPS: Income (or earnings)
for a specific period (usually a quarterly or a fiscal year
period) divided by the average number of shares outstanding
during that period.
Market Maker: A broker/dealer that maintains a firm
bid and offer price in a given security by standing ready
to buy or sell at publicly quoted prices.
Stock: Ownership of a company or corporation, represented
by "shares" of stock that claim ownership on the
company's earnings and assets.
Ask Price (or "offer" price): The price at which
a Market Maker is willing to sell a security.
Assets: Any possessions that have value on an exchange.
Assets include tangible items such as inventories, equipment,
real estate, as well as intangible items such as property
rights or goodwill.
Bear Market: A bear market is one in which prices
are low or declining.
Blue-chip stocks: A term generally applied to stocks
of well-established companies that are known for their long-standing
track records.
Broker: An individual or a firm that brings together
buyers and sellers but does not take a position in the asset
to be exchanged.
Bull Market: A bull market is one in which stock
prices are high or rising.
The Over-The Counter Market:
The NASDAQ National Market: This the trading venue
for the largest, most liquid stocks, like Intel or Yahoo!
The NASDAQ Smallcap Market: This market hosts up-and-coming
companies. Both NASDAQ Smallcap and NASDAQ National Markets
offer wide distribution of quotes, news, and company information.
Over-The-Counter Stock: A stock that is traded electronically
among a group of broker/dealers instead of an exchange like
the NYSE or AMEX.
The OTC Bulletin Board: (OTCBB) Offers electronic
distribution of quotes, but is considered to be a lower-level
tier.
The Pink Sheets: These are the bottom-tier stocks,
with limited distribution of electronic quotes. Companies
that trade here aren't required to file financial information
with the SEC.
Exchanges, Indexes and averages:
AMEX: The American Stock Exchange© is the second
largest floor-based securities exchange in the United States.
It has significant presence in both listed equities and
derivative securities. Amex had long been on the leading
edge of exchanges worldwide in trading-floor technology,
service to its listed companies, and innovative new product
development. The National Association of Securities Dealers,
Inc., in 1998, acquired it.
Exchange: An organized marketplace in which stocks,
common stock equivalents, and bonds are traded by members
of the exchange, acting both as brokers and dealers/traders.
Such exchanges have a physical location where brokers and
dealers meet to execute orders from institutional and individual
investors and to buy and sell securities.
S&P 500: (Standard & Poor's Corporation)
A company well known for its rating of stocks and bonds
according to investment risk (the standard and Poor's Rating)
and for compiling the Standard & Poor's Index-commonly
called the Standard & Poor's 500-that tracks 400 industrial
stocks, 20 transportation stocks, 40 financial stocks, and
40 public utilities as a measurement indicative of broad
changes in the market.
Dow Jones Averages: The Dow Jones Industrial Average
or (DJIA) is a price-weighted average of 30 actively traded
blue chip stocks, primarily industrials but including American
Express Co. and AT&T. Prepared and published by Dow
Jones & Co., it is the oldest and most widely quoted
of all the market indicators. The average is quoted in points,
not in dollars.
NYSE: New York Stock Exchange. The NYSE is the oldest,
largest and most honored exchange in the United States.
The NYSE is sometimes referred to as the Big Board. Thousands
of larger companies are listed on this exchange and it has
many operating divisions composed of marketers, legal experts,
developers, planners, and economists. The NYSE is considered
to be one of the more economic "indicators."
NASDAQ: The National Association of Security Dealers
Automated Quotations. The NASDAQ is a computer operated
and owned by NASDAQ that provides dealers with price quotations
for stock and securities traded on the NASDAQ. Stocks on
the NASDAQ feature many new and volatile corporations and
many of them relatively new.
INDEX: A market indicator, such as the NASDAQ Composite
or the Dow Jones, that represents a measure of the relative
value of a combined group of stocks.
Dividends and splits:
Reverse Stock Split: A proportionate decrease in
the shares of stock held by stockholders. For example, a
1-for-2 split would result in the stockholders owning 1
share for every 2 shares owned before the split. A company
generally institutes a reverse split in order to increase
the market price of its stock.
Dividend: Distribution to shareholders of cash or stock
declared by the company's board of directors
Stock Split: The division of outstanding shares
of a corporation into a larger number of shares. For example:
in a 2-for-1 spilt, each holder of 100 shares before would
now have 200 shares, although the proportionate equity in
the company would remain the same.
Mutual Funds
Portfolio: The combined holdings of more than one
stock, bond commodity, real estate investment, or other
assets by an individual or institutional investor.
Mutual Fund: Fund operated by an investment company
that raises money from shareholders and invests it in stocks,
bonds, options, commodities or money market securities.
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