Finance Glossary


Baring Your FANGs

  In the current stock market, FANG is an acronym referring to four high-performing tech companies consisting of Facebook, Amazon, Netflix, and Google (which is now officially Alphabet, Inc.). The acronym was devised by CNBC Mad Money host Jim Kramer. All four of these stock are known for high returns for investors. They are traded on […]


  A correction is a reversal in a stock, bond, commodity or index of 10% or more. This reversal usually takes the form of a negative movement preceded by an upward trend. The correction occurs because stocks are overvalued, and eventually investors cash in and sell stock until the price returns to a realistic value. Corrections […]

Understanding Earnings Per Share

Earnings per share (EPS) refers to amount of a company’s profit associated tied to each outstanding share in the stock market. It is calculated by taking a company’s net income, subtracting preferred dividends, and dividing the difference by the number of shares, or: EPS =  (Net Income  –  Preferred Dividends) / Average number of shares […]

What is Market Efficiency?

  Market efficiency is the degree to which the market reflects all available, relevant information. The concept of market efficiency was popularized in the 1970s by economist Eugene Fama. According to Fama’s efficient market hypothesis (EMH), stock prices and prices of other securities have a close relationship to all available information relevant to the market […]

Bid-Ask Spread

  A bid-ask spread for a stock is the difference between the ask price offered by the seller and the bid price offered by the buyer. It is also called simply the “bid-ask” or the “sell spread.” To give an example, a seller might ask $5 for a stock, while the buyer bids only $4. The […]

What is a Yield Curve?

Yield curves are used to plot the interest rates of different bonds at a particular point in time. In order for bonds to be compared using a yield curve, the must have equal credit quality (or bond ratings), but different maturity dates. The X-axis corresponds to the maturity dates, while the Y-axis corresponds to the […]

The Importance of Rebalancing

  In a previous blog, we discussed strategies of asset allocation. One important way to maintain a proper allocation of assets is through the tool of rebalancing.   Rebalancing is the practice of buying or selling assets in order to maintain a particular proportion of asset allocation in a portfolio. For instance, let’s say I want […]

Understanding Candlestick Charts

A candlestick chart is a useful tool for understanding a stock’s behavior in the marketplace, and is often used to gauge investor sentiment. Each “candlestick” in the chart represents stock behavior for a particular day. The “body” of the candlestick is the space between the opening and closing price of the stock for that day. If […]

Short Selling

  Short selling refers to the selling of shares not owned by the seller, but are instead usually borrowed. Short selling occurs because an investor believes that the price of a stock will decline, essentially “betting against” a company. This makes short selling an inherently risky practice. Short selling usually begins with a trader borrowing shares […]

Breaking Down CDs

    A certificate of deposit (CD) is a low-risk investment consisting of a saving certificate issued by a commercial bank or other financial institution. A CD has a fixed maturity date as well as a fixed interest date. Generally speaking, the longer the CD has to mature (known as the “term”), the higher the interest […]
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