Question

Volatility Index Exchange NYSE NASDAQ AMEX Nikkei S&P 500 Dow Jones Broker Series 7 exam Growth stock Blue Chip Stock Value Stock Speculative Stock Cyclical Stock Countercyclical Stock Income Stock Dividend Volume Beta Common Stock Preferred Stock Dividend Volume Bull & Bear Market Investment Bubble Book Value Market Value IPO Conceptual Questions

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Answer 1

Ans

• Volatility : It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease.For example change in the price of a individual banking stock due to change in the interest rate by the fedral reserve.
• Index : A index is an indicator or measure of something, and in finance, it typically refers to a statistical measure of change in a securities market. In financial markets, stock, and bond market indices consist of a hypothetical portfolio of securities representing a particular market or a segment of it. For example , The S&P 500 and the US Aggregate Bond Index are common benchmarks for the American stock and bond markets, respectively. In reference to mortgages, it refers to a benchmark interest rate created by a third party.
• Securities Exchange : Organized and regulated financial market where securities bonds, notes, shares are bought and sold at prices governed by the forces of demand and supply. It serves to two market mainly primary market for the IPO and the secondary market for trading the securities on day to day basis.
• The New York Stock Exchange (NYSE) : The New York Stock Exchange (NYSE) is a stock exchange located in New York City that is considered the largest equities-based exchange in the world, based on the total market capitalization of its listed securities. Formerly run as a private organization, the NYSE became a public entity in 2005 following the acquisition of electronic trading exchange Archipelago. In 2007 a merger with Euronext, the largest stock exchange in Europe, led to the creation of NYSE Euronext, which was later acquired by Intercontinental Exchange, the current parent of the New York Stock Exchange.
• NASDAQ : The NASDAQ is an electronic exchange where stocks are traded through an automated network of computers instead of a trading floor. It stands for the National Association of Securities Dealers Automated Quotations System and is the world's second-largest stock exchange based on market capitalization.
• AMEX : An American Express card, also known as an "AmEx," is an electronic payment card branded by the publicly-traded financial services company American Express . American Express issues and processes prepaid, charge, and credit cards. American Express cards are available to individuals, small businesses, and corporate consumers in the U.S. and around the world.
• NIKKEI : The Nikkei is short for Japan's Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index composed of Japan's top 225 blue-chip companies traded on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the United States.
• S & P 500 : The S&P 500 , is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.
• DOW JONES : The Dow Jones Industrial Average (DJIA) is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.
• BROKER : Its a individual or a firm who is registered in the stock exchange which helps in facilitating the buy and sale of the stocks in a exchange for which it charges a percentage commission on the same for his services.
• Series 7 Exam : The Series 7 exam licenses the holder to sell and buy all types of securities products except commodities and futures. Known formally as the General Securities Representative Qualification Examination, the Series 7 exam and its licensing is administered by the Financial Industry Regulatory Authority (FINRA).Stockbrokers in the United States need to pass the Series 7 exam to obtain a license to trade. The Series 7 exam focuses on investment risk, taxation, equity, and debt instruments; packaged securities, options, retirement plans, and interactions with clients.
• Growth stock : A growth stock is a share in a company that is anticipated to grow at a rate significantly above the average for the market.
• Blue Chip Stocks : A blue-chip stock is a huge company with an excellent reputation. These are typically large, well-established and financially sound companies that have operated for many years and that have dependable earnings.
• Value Stock : A value stock is a stock that trades at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.
• Speculative stock : A speculative stock is a stock that a trader uses to speculate and not on the basis of its earning or viability of the stock which may give them a better return but carries a bigger risk too.
• Cyclical Stocks : A cyclical stock refers to an equity security whose price is affected by macroeconomic, systematic changes in the overall economy for example mortgage industry.
• Counter cyclical Stocks : A countercyclical stock is a stock whose price tends to move in opposition to the overall business cycle. When the market rises, the stock price falls, and when the market falls, the stock price moves higher.
• Regular Stock: An income stock is an equity security that pays regular, steadily increasing dividends and there price in the stock market do not fluctuate too much as they are steady.
• Dividend : It is paid to the Shareholder of a company in participation to its capital the company pay them a amount out of it known as dividend.
• Volume : It is the amount of Share ,bonds and treasury bill being traded in the stock market and it is expressed in the terms of volume of Buy and sell i.e the demand and supply of a particular stock in the stock exchange market where buy shows the demand and the sell show the price of a stock it helps in determining the stock price.
• Beta : A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock's returns against those of the market.
• Common Stock or Equity Shares : They are the stocks which represent the main shareholders of the firm and they are treated as the owner of the firm who in turn have the voting rights to form the management and take a view on the financial standing of the firm and take part in the profit of the firm for the amount of capital being invested by them.
• Preferred stock: Preferred shareholders have priority over common stockholders when it comes to dividends, which generally yield more than common stock and can be paid monthly or quarterly. preferred stockholders have limited rights which usually does not include voting. Preferred stock combines features of debt, in that it pays fixed dividends and attract the investors.
• Bull and Bear Market : A bull market is the condition of a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies and commodities. Because prices of securities rise and fall essentially continuously during trading, the term "bull market" is typically reserved for extended periods in which a large portion of security prices are rising.

                                                                                                                             The opposite of a bull market is a bear market, which is characterized by falling prices and typically shrouded in pessimism. As a bear tries to swipe it paws downwards i.e the investors are trying to bring the stocks price down.

• Investment Bubble : A investment bubble is an economic cycle characterized by the rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. For example the Sub-Prime mortgage crisis of 2008 where prior to it there had been a investment bubble to invest in such investment so as to get higher returns.
• Book Value: Book Value of a stock means the actual underlying assets of a corporation in lieu of the shares it has issued is the real value of the shares which in case of insolvency of the firm the shareholders will be paid from the assets.
• Market Value : It is the price at which a stock is being traded in stock exchange as its price is being determined by the demand and supply of the stock due to its return, economic condition in domestic as well as international market.
• IPO(Initial Public Offerings) : A Initial public Offerings is the issuance of a new stocks to the public by a company to raise the capital for it so as to use it the same for investment and production activity .A IPO is generally made through a underwriter who charges a commission to sell the shares and in case of un-subscription by the same from the company.