Financial and Business Terms - from Beg to Bet
Saturday, May 9, 2009
- Beggar-thy-neighbor: An international trade policy of competitive devaluations and increased protective barriers where one country seeks to gain at the expense of its trading partners.
- Beggar-thy-neighbor devaluation: A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at other countries' expense and reduce imports. Such devaluations often lead to trade wars.
- Benchmark: The performance of a predetermined set of securities, for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.
- Benchmark error: Use of an inappropriate proxy for the true market portfolio.
- Benchmark interest rate Also called the base interest rate: It is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a comparable-maturity Treasury security that was most recently issued ("on-the-run").
- Benchmark issues: Also called on-the-run or current coupon issues or bellwether issues. In the secondary market, it's the most recently auctioned Treasury issues for each maturity.
- Best-efforts sale: A method of securities distribution/ underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm holding any unsold shares in its own account if necessary).
- Best-interests-of-creditors test: The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated.
- Beta (Mutual Funds): The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means the fund's total return is likely to move up or down 70% of the market change; 1.3 means total return is likely to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away.
- Beta equation (Mutual Funds):
The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund - Beta equation (Stocks) :
The beta of a stock is determined as follows: [(n) (sum of (xy)) ]-[(sum of x) (sum of y)] [(n) (sum of (xx)) ]-[(sum of x) (sum of x)] where: n = # of observations (24-60 months) x = rate of return for the S&P 500 Index y = rate of return for the stock
Labels: Financial and Business Terms / Dictionary
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