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EAFE Index EAFE refers to Europe, Australia and the Far East. The index, which is compiled by Morgan Stanley, is an aggregate of 21 individual country indexes that collectively represent many of the major markets of the world.
Economic Earnings The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.
Economic Indicator An economic measure used to determine economic growth. Examples include GDP, Consumer Price Index, Money Supply, Trade Balance, Unemployment Rate, etc.
Efficient Diversification The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.
Efficient Market Hypothesis (EMH) In general the hypothesis states that all relevant information is fully and immediately reflected in a securitys 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-b form (stock prices reflect all publicly available information) and b form (stock prices reflect all relevant information including insider information).
Elasticity (of an option) Percentage change in the value of an option given a 1% change in the value of the option`s underlying stock.
Elliott Wave Theory Elliott is a method of analysing markets based on patterns of past price action and how these patterns relate to a simple master plan. The master plan is that there is an impulse wave consisting of 5 parts, followed by a corrective wave, usually of 3 parts but which can get somewhat complex. The master plan has a number of rules in particular relating to the relationships between the various waves and uses Fibonacci numbers including the "Golden" ratio of 61.8%. Elliott is a very optimistic theory as down moves are always corrective and new impulse moves always go to new highs eventually.
EMS European Monetary System
EMU European Monetary Union
Entry The act of taking a trading position in the market.
Equivolume Chart Richard Arms created this type of chart. It measures the relationship between price and volume. Price is measured on the vertical axis and volume is measured on the horizontal axis.
Eurodollars Deposits denominated in US dollars held in banks outside the United States, mainly in Europe, and commonly used for settling international transactions.
European Option An option which can only be exercised on its expiration date.
Equity Refer to securities that represent ownership (equity in a company) in other words, stocks.
Exchange rate The price at which one currency trades for another.
Exchange risk The risk that an investment`s value will change because of currency exchange rates.
Exchanges The places where stocks, bonds, and other securities are bought and sold. Membership on an exchange is called exchange seat.
Exercise The right granted under the terms of a listed options contract.
Exercise Price The price at which the security underlying a future or options contract may be bought or sold.
Exit The act of ending a trading position in the market.
Expected Return The expected return on a risky asset, given a probability distribution for the possible rates of return.
Expert Systems A type of application program that makes decisions or solves problems in a particular field by using knowledge and analytical rules defined by experts in the field.
Expiration Date The last day or the only day on which an option may be exercised.
Exponential Moving Average Similar to a moving average except it gives greater weight to recent price data. EMAs are calculated by the following formula: EMA = (today's closing price * k) + (yesteday's moving average value * (1-k)), where k=2/(n+1); n = the specified number of periods.
Extendable Bond Bond whose maturity can be extended at the option of the lender or issuer .

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