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Investments Chapter 3
Investment terms from Chapter 3
24
Business
Undergraduate 3
02/23/2013

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Term
Margin account (p.50)
Definition
A brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. Allows the investor to borrow a percentage of the purchase price from the brokerage firm.
Term
Long position (p.51)
Definition
Occurs when an investor establishes a position in a security by purchasing the security for their account.
Term
Short position (p.51)
Definition
The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.
Term
Limit order (p.53)
Definition
Type of order that limits the price at which an investor is willing to buy or sell and ensures that the investor will pay no more than the limit price on a buy or receive no less than the limit price on a sell.
Term
Stop order (p.53)
Definition
A type of order that is place at a specific price so that when that price is reached a market order is executed close to this point but not necessarily at the exact price specified.
Term
Online broker (p.54)
Definition
Type of broker that uses the internet to allow investors to have their own account, review the operating procedures and commission schedule, and initiate a trade. Usually these brokers trade at a discount to traditional exchanges.
Term
Capital gain or loss (p.56)
Definition
Gain or loss that occurs when an asset held for investment purposes is sold.
Term
Dow Jones Industrial Average (DJIA, p.57)
Definition
Market index that consists of 30 large industrial companies and is considered a "blue-chip" index. One of the most popular indexes. It is a price-weighted average.
Term
Price-weighted average (p.59)
Definition
Type of average in which each stock in the average is weighted by its price. Tend to give a higher weighting bias to high-price stocks than to low-price stocks.
Term
Standard and Poor's 500 Stock Index (p.61)
Definition
Index widely followed by professional money managers and security market researchers as a measure of broad stock market activity. The stocks in this index are equivalent to approximately 75 percent of the total value of the U.S. equities market. Is a value-weighted index.
Term
Standard and Poor's 400 MidCap Index (p.61)
Definition
Index composed of 400 middle-sized firms that have total market values between $200 million and $6.7 billion.
Term
Standard and Poor's 600 SmallCap Index (p.61)
Definition
Index that is composed of 600 small cap stocks. Used for comparison of stocks that are smaller than the MidCap.
Term
Standard and Poor's 1500 Stock Index (p.61)
Definition
Index that combines the S&P 500, the S&P 400 MidCap, and the S&P SmallCap 600.
Term
Standard and Poor's 100 Index (p.61)
Definition
Index composed of 100 blue-chip stocks on which the Chicago Board Options Exchange has individual option contracts.
Term
Value Line Average (p.63)
Definition
Average that represents 1,700 companies from the New York and American stock exchanges and the Nasdaq market. Is an equal-weighted index.
Term
Equal-weighted index (p.63)
Definition
Index that is weighted equally between each stock.
Term
Value-weighted index (p.63)
Definition
Index in which each company is weighted in the index by its own total market value as a percentage of the total market value for all firms.
Term
Wilshire 5000 Equity Index (p.64)
Definition
The most comprehensive index and represents the total dollar volume of all U.S. equity issues with readily available price data from the NYSE, AMEX, and Nasdaq stock markets.
Term
American Exchange Composite Index (AMEX, p.64)
Definition
Index composed of all stocks trading on the American Stock Exchange.
Term
Russell 1000 Index (p.65)
Definition
Index that includes only the largest 1,000 firms out of the Russel 3000.
Term
Russell 2000 (p.65)
Definition
Index that includes only the smallest 2,000 out of the Russell 3000.
Term
Russell 3000 Index (p.64)
Definition
Index that comprises 3,000 U.S. stocks as measured by market capitalization (market value times shares outstanding).
Term
The Global Dow (p.66)
Definition
Index that covers the performance of all the world's markets combined.
Term
Tokyo Nikkei Stock Average (p.66)
Definition
Japan's primary stock index.
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