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Investment: An A-Z Guide

Book Description

Stockmarkets have soared and slumped, highlighting the risks of different kinds of investments. Everyone wants to buy low and sell high - and get a healthy stream of income in between. But it is not easy to do so. Any strategy for investment requires an essential level of knowledge that goes beyond the basics. This clear and lively guide explains the complexities and jargon of the investment world with entries that stretch from A to Z and cover such products, concepts and terms as: Advance-decline line, Arbitrage, Bear squeeze,Bottom fishing, Capital asset pricing model, Covariance, Dead cat bounce, Dow theory, Efficient frontier, Equity risk premium, Fibonacci numbers, Floating rate note, Golden cross, Hedge ratio, Indifference curve, Japanese candlesticks, Kondratief cycle,Mark to market, Noise trader, Odd-lot theory, Portfolio theory, Price-to-book ratio, Qualitative analysis, Random walk. Security analysis, Straddle, Tobin’s Q, Trading collar, Unsystematic risk, Yield gap, Zero coupon bond. It also includes appendices on the performance of different stock markets over time, bond returns, leading equity markets, investment formulas and recommended reading.

Table of Contents

  1. Cover
  2. Introduction
  3. Investment’s past and future
    1. Securitisation surge
    2. Northern Rock cracks
    3. The long view
    4. Stockmarket volatility
    5. Survivorship bias
    6. Are investors rewarded for their patience …
    7. … or for taking on risk?
    8. Behavioural finance
    9. Other building blocks
    10. Summary
  4. Aa
    1. Accruals concept
    2. Accrued interest
    3. ACT
    4. ADR
    5. Advance corporation tax
    6. Advance-decline line
    7. AIM
    8. All-Share Index
    9. Alpha
    10. Alternative Investment Market
    11. American depositary receipt
    12. American Stock Exchange
    13. Amortisation
    14. Annual report
    15. Annuity
    16. APT
    17. Arbitrage
    18. Arbitrage pricing theory
    19. Arithmetic mean
    20. Asset
    21. Asset allocation
    22. Asset stripping
  5. Bb
    1. Backwardation
    2. Balance sheet
    3. Balanced fund
    4. Bar chart
    5. Bargain issue
    6. Basis
    7. Basis point
    8. Bear
    9. Bear squeeze
    10. Bearer security
    11. Behavioural finance
    12. Bellwether stock
    13. Beta
    14. Bid price
    15. Big Bang
    16. Big Board
    17. Binomial option pricing model
    18. Black Monday
    19. Black-Scholes option pricing model
    20. Bollinger bands
    21. Bond
    22. Bond rating
    23. Bonus issue
    24. Book value
    25. Bottom fishing
    26. Brady bond
    27. Buffett, Warren
    28. Bull
    29. Bulletin board
  6. Cc
    1. CAC 40 Index
    2. Calendar effect
    3. Call hedge
    4. Call option
    5. Capital asset pricing model
    6. Capital fulcrum point
    7. Capital gains tax
    8. Capital market line
    9. Capital market theory
    10. Capitalisation issue
    11. Capitalise
    12. CAP-M
    13. Carried interest
    14. Cash flow
    15. CDO
    16. CFD
    17. Chartist
    18. Chicago Board of Trade
    19. Chicago Mercantile Exchange
    20. Chinese wall
    21. Circuit breaker
    22. Closed-end fund
    23. Coin-flipping contest
    24. Collateralised debt obligation
    25. Common stock
    26. Compound return
    27. Contract for difference
    28. Convertible
    29. Corporate filing
    30. Corporate governance
    31. Corporate social responsibility
    32. Counterparty
    33. Coupon
    34. Covariance
    35. Covered option
    36. Covered warrant
    37. Credit crunch
    38. Credit derivative
    39. Crest
    40. CSR
    41. Cum-dividend
    42. Cum-rights
  7. Dd
    1. Data mining
    2. DAX 30
    3. Day trading
    4. Dead cat bounce
    5. Dead cross
    6. Debenture
    7. Deeply discounted rights issue
    8. Delta
    9. Depreciation
    10. Derivatives
    11. Deutsche Börse
    12. Deutsche Terminbörse
    13. Dilution
    14. Directors’ dealing
    15. Discount rate
    16. Discounted cash flow
    17. Dividend
    18. Dividend cover
    19. Dividend discount model
    20. Dividend pay-out ratio
    21. Dividend yield
    22. Dollar cost averaging
    23. Charles Dow
    24. Dow Jones Industrial Average
    25. Dow theory
    26. DTB
    27. Duration
  8. Ee
    1. Earnings
    2. Earnings announcement
    3. Earnings yield
    4. EBITDA
    5. ecn
    6. Efficient frontier
    7. Efficient market hypothesis
    8. Efficient portfolio
    9. Electronic communication network
    10. Elliot wave theory
    11. Emerging market
    12. EMH
    13. Enterprise value
    14. Equity
    15. Equity risk premium
    16. ETF
    17. Eurex
    18. Eurobond
    19. Euromarket
    20. Euronext
    21. Euronext.LIFFE
    22. Ex-ante
    23. Ex-dividend
    24. Ex-post
    25. Ex-rights
    26. Exchange traded fund
    27. Execution only
    28. Exercise price
    29. Expected return
  9. Ff
    1. Fibonacci numbers
    2. FIFO
    3. Financial futures
    4. Financial Services Authority
    5. First in, first out
    6. Fixed-income security
    7. Fixed-interest security
    8. Flat yield
    9. Floating-rate note
    10. Forward price
    11. Frankfurt Stock Exchange
    12. Free cash flow
    13. FRN
    14. FSA
    15. FTSE AIM Indices
    16. FTSE All-Share Index
    17. FTSE 100
    18. FTSE 250
    19. FTSE 350
    20. Fundamental analysis
    21. Futures
    22. Futures option
  10. Gg
    1. GAAP
    2. Gann theory
    3. Gearing
    4. Generally accepted accounting principles
    5. Geometric mean
    6. Gilt-edged stock
    7. Glass-Steagall Act
    8. Golden cross
    9. Goodwill
    10. Graham, Benjamin
    11. Greenmail
    12. Grey market
  11. Hh
    1. Hang Seng Index
    2. Head and shoulders
    3. Hedge
    4. Hedge fund
    5. Hedge ratio
    6. Horizon premium
  12. Ii
    1. IFRS
    2. Immunisation
    3. In the money
    4. Income statement
    5. Index arbitrage
    6. Index fund
    7. Index-linked gilts
    8. Index-linked security
    9. Index option
    10. Indifference curve
    11. Individual retirement account
    12. Individual savings account
    13. Initial public offering
    14. Insider dealing
    15. Intangible assets
    16. Internal rate of return
    17. International Financial Reporting Standards
    18. Intrinsic value
    19. Inventory
    20. Investment banking
    21. Investment trust
    22. IPO
    23. IRA
    24. IRR
    25. ISA
  13. Jj
    1. January effect
    2. Japanese candlestick chart
    3. Junk bond
  14. Kk
    1. Keogh plan
    2. Kondratieff cycle
  15. Ll
    1. Last in, first out
    2. Leverage
    3. Leveraged buy-out
    4. Liability
    5. LIFO
    6. Livermore, Jesse
    7. London International Financial Futures and Options Exchange
    8. London Stock Exchange
    9. Long
    10. Long-only fund
    11. Low price/earnings ratio stock
  16. Mm
    1. Marché à Terme des Instruments Financiers
    2. Marché des Options Négociables de Paris
    3. Margin
    4. Mark to market
    5. Marketmaker
    6. Matched bargain
    7. MATIF
    8. Merger accounting
    9. Mezzanine finance
    10. Modigliani-Miller theorem
    11. Momentum
    12. MONEP
    13. Money market fund
    14. Mortgage
    15. Mutual fund
  17. Nn
    1. nasdaq
    2. NASDAQ Europe
    3. Net present value
    4. Net worth
    5. Neuer Markt
    6. New York Stock Exchange
    7. Nikkei 225
    8. Noise trader
    9. NPV
    10. NYSE
    11. NYSE Composite Index
    12. NYSE Euronext
  18. Oo
    1. Odd-lot theory
    2. OEICS
    3. OFEX
    4. Offer price
    5. On-the-run bond
    6. Open-end fund
    7. Open-ended investment company
    8. Open interest
    9. Open offer
    10. Open outcry
    11. Option
    12. Options premium
    13. Ordinary share
    14. OTC
    15. Out of the money
    16. Over-the-counter
  19. Pp
    1. Pac-man defence
    2. Pari passu
    3. Paris Bourse
    4. Payback period
    5. PEP
    6. P/E ratio
    7. Personal equity plan
    8. PLUS Markets
    9. Point and figure chart
    10. Poison pill
    11. Pooling of interests
    12. Portfolio theory
    13. Pre-emption rights
    14. Preference share
    15. Preferred stock
    16. Premium
    17. Price/earnings ratio
    18. Price-to-book ratio
    19. Private equity
    20. Probability theory
    21. Profit margin
    22. Program trading
    23. Put hedge
    24. Put option
  20. Qq
    1. Qualitative analysis
    2. Quantitative analysis
  21. Rr
    1. R&D
    2. R-squared
    3. Random walk
    4. Real
    5. Real estate investment trust
    6. Redemption yield
    7. Registered security
    8. Regression analysis
    9. Reinvestment rate
    10. REIT
    11. Repo
    12. Research and development
    13. Residual income
    14. Return on capital
    15. Reverse yield gap
    16. Rights issue
    17. Risk
    18. Risk and reward
    19. Risk arbitrage
    20. Risk-free asset
    21. Risk-free rate of return
    22. Rule of 72
    23. Rule of twenty
  22. Ss
    1. S&P 500 Index
    2. Sarbanes-Oxley Act
    3. Scrip issue
    4. SEAQ
    5. SEC
    6. Securities and Exchange Commission
    7. Securitisation
    8. Security Analysis
    9. Security market line
    10. Self-invested personal pension
    11. Serious Fraud Office
    12. SETS
    13. SFO
    14. Sharpe ratio
    15. Short
    16. Short interest ratio
    17. Short selling
    18. Single index model
    19. Sinking fund
    20. SIPP
    21. Small cap stock
    22. Soros, George
    23. Sortino ratio
    24. South Sea Bubble
    25. Special purpose vehicle
    26. Specialist
    27. Speculative value
    28. Speculator
    29. Spot price
    30. Spread
    31. Spread betting
    32. Stag
    33. Standard deviation
    34. Stock
    35. Stockbroker
    36. Stock Exchange Automated Quotations
    37. Stock Exchange Trading Service
    38. Stop loss
    39. Straddle
    40. Strike price
    41. Strips
    42. Survivor bias
    43. Swaps
    44. Systematic risk
  23. Tt
    1. The Takeover Panel
    2. Tax-exempt special savings account
    3. Tech mark
    4. Technical analysis
    5. Term
    6. Term structure of interest rates
    7. TESSA
    8. Tick
    9. Time value
    10. Tobin’s Q
    11. Tokyo Stock Exchange
    12. TOPIX
    13. Total return
    14. Touch
    15. Tracker fund
    16. Traded option
    17. Trading collar
    18. Transaction costs
    19. Treasury bill
    20. Treasury bond
    21. Treasury note
    22. Triple witching
    23. Tulipmania
  24. Uu
    1. Unit trust
    2. Unsystematic risk
  25. Vv
    1. Value investing
    2. Value Line Composite Index
    3. Vanilla
    4. Variance
    5. Venture capital
    6. Volatility
  26. Ww
    1. Wall Street Crash
    2. Warrant
    3. Weight of money
    4. Weighted average cost of capital
    5. Wilshire 5000 Index
    6. Writer
  27. Yy
    1. Yield
    2. Yield curve
    3. Yield gap
    4. Yield spread
    5. Yield to maturity
  28. Zz
    1. Zero-coupon bond
  29. Appendices
    1. 1 Stockmarket returns
      1. UK
      2. United States
    2. 2 Stockmarket performances
      1. UK
      2. United States a
      3. Japan and Hong Kong
      4. Canada and Germany
      5. Emerging markets
    3. 3 Government bond returns and inflation
      1. UK
      2. United States
    4. 4 The world’s leading equity markets, end-2008
    5. 5 Investment formulas
      1. Capital fulcrum point
      2. Black-Scholes model
      3. Single index model
      4. Capital asset pricing model
      5. Capital market line
      6. Dividend discount model
    6. 6 Recommended reading
      1. Highly recommended
      2. Others