Finance Glossary


Understanding Volatility

One measure frequently used to to describe behavior of a stock is volatility. Volatility indicates the dispersion of returns for a particular security, usually in relation to returns from the same security or a broader market index. In simpler terms, volatility expresses how much risk or uncertainty is associated with a stock’s value. The higher […]

Inside the Dow

The Dow, or the Dow Jones Industrial Average (DJIA), is the most watched stock index on the planet. It is a price-weighted average  tabulated from 30 high profile stocks traded on the NYSE and NASDAQ, including those of the world’s most influential companies. The Dow is such an important measure of market performance that both […]

Macroeconomic Terms: Free Rider Problem

In economic policy, a free rider, is a type of market failure in which a person or entity takes advantage of a public good without paying for it, like a bus passenger that does not pay their ticket. The free rider problem only applies when supply is not significantly diminished by the number of people […]

Over the Counter

Over-the-Counter refers to much more than just the aspirin you buy at a convenience store. In investing, over-the-counter (or OTC) refers to a security traded outside of a formal exchange like the NYSE. Usually these stocks are traded via a dealer network rather than a formal stock exchange. Although Nasdaq operates like a dealer network, […]
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What is Equilibrium?

Equilibrium refers to a balance in supply and demand, resulting in stability in prices. In classical economics, free markets naturally tend toward a state of equilibrium: lowered supply creates higher prices, which in turn sparks reduced demand. This principle also works in reverse: excessive supply leads to cheaper prices, increasing demand. In the long term, […]
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Too Hot to Handle: Overheating in Economics

Summer is a time for fun in the sun, though about this time of year the sun usually gets a bit excessive for most people. Drink fluids and wear plenty of sunscreen! Or alternatively you could stay indoors and read up on your macroeconomic terms. Overheating also happens to be a phenomenon in that happens […]
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Chasing the Unicorn

In today’s tech world, you will hear many of the hottest companies referred to as “unicorns.” But what exactly is a unicorn, and what do unicorns mean for the economy?   The term “unicorn” was first coined in 2013 by venture capitalist Aileen Lee, founder of Cowboy Ventures. In a popular article, Lee discussed software […]
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The DRIP Effect

  A dividend reinvestment plan (DRIP) refers to an investment feature in which shareholder dividends are automatically reinvested in stock of the same company. This reinvestment happens in lieu of a quarterly cash dividend payment (The income is still taxed). Often DRIPs will feature added benefits such as discounted shares and coverage of broker’s fees. […]
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What is an Activist Shareholder?

Amazon’s recent acquisition of Whole Foods was in large part due to pressure on Whole Foods co-founder John Mackey from activist investor Jana Partners. But just what is an activist investor? The rise of the activist investor, or activist shareholder, occurred during the 1980s. Investors like Carl Icahn and T. Boone Pickens began buying stock […]
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Elasticity and Demand

In general economic terms, elasticity refers to how responsive a variable is to another variable. Most often, the term elasticity is applied to how demand for a product changes depending on the price.  Mathematically, this is expressed as a ratio of the change in price to  the change in quantity demanded.   Elasticity =  Percent […]
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