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Glossary of Financial Terms: B




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This article is from the Glossary of Financial Terms.

Glossary of Financial Terms: B

  • Back office
    Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance.

  • Banker's acceptance
    A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These instruments have been a popular investment for money market funds.

  • Basis
    The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold.

  • Basis points
    Refers to yield on bonds. Each percentage point of yield in bonds equals 100 basis points. If a bond yield changes from 7.25 % to 7.39 %, that's a rise of 14 basis points.

  • Bear
    An investor who believes a stock or the overall market will decline. A bear market isa prolonged period of falling stock prices, usually by 20% or more.

  • Bear raid
    A situation in which large traders sell positions with the intention of driving prices down.

  • Beta (stocks)
    Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70 % of the market change; 1.3 means the stock is likely to move up or down 30 % more than the market.

  • 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


  • Beta (mutual funds)
    The measure of a fund's risk in relation to the market. 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 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


  • Blow-off top
    A steep and rapid increase in price followed by a steep and rapid drop in price. This is an indicator seen in charts and used in technical analysis of stock price and market trends.

  • Breakout
    A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indication.

  • Bull
    An investor who thinks the market will rise.

  • Bull market
    A market which is on a consistent upward trend.

  • Buyout
    Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buyout is done with borrowed money.

 

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