The gain or loss on foreign investments due to changes in the relative value of assets denominated in a currency other than the principal currency with which a company normally conducts business. A rising domestic currency means foreign investments will result in lower returns when converted back to the domestic currency. The opposite is true for a declining domestic currency. |||Foreign investments are complicated by currency fluctuation and conversion between countries. A high-quality investment in another country may prove worthless because of a weak domestic currency. Foreign-denominated debt used to purchase domestic assets has led to bankruptcy in several cases due to a fast decline in a domestic currency or a rapid rise in the currency of the foreign-denominated debt.
A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election. Taobiz explains Presidential Election Cycle (Theory) While the theory played out relatively reliably in the early to mid 1900s, data from the later twentieth century has disproved it. In 1937, Franklin D. Roosevelt's first year, the market was down by 27.3%. The Truman and Eisenhower eras also started off with a down year in the stock market. The start of more recent presidencies, however, did not show the same pattern. In George H.W. Bush's first year, the market was up 25.2%, and the start of both of Bill Clinton's terms showed strong market performance - up by 19.9% and 35.9%.
A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. |||These types of bonds are attractive to both investors and issuers. The investors receive the safety of guaranteed payments on the bond and are also able to take advantage of any large price appreciation in the company's stock. (Bondholders take advantage of this appreciation by means warrants attached to the bonds, which are activated when the price of the stock reaches a certain point.) Due to the equity side of the bond, which adds value, the coupon payments on the bond are lower for the company, thereby reducing its debt-financing costs.
A ratio used to determine a stock's value while taking into account earnings growth. The calculation is as follows: Taobiz explains Price/Earnings To Growth - PEG Ratio PEG is a widely used indicator of a stock's potential value. It is favored by many over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued. Keep in mind that the numbers used are projected and, therefore, can be less accurate. Also, there are many variations using earnings from different time periods (i.e. one year vs five year). Be sure to know the exact definition your source is using.
A price-earnings ratio of a stock divided by the price-earnings ratio of a market measure, or index, such as the S&P 500 or Wilshire 5000. Taobiz explains Price-Earnings Relative This is a method for judging whether a price-earnings ratio is reasonable in relation to market conditions and historical P/Es.
Goods, securities or instruments that are equivalent and, therefore, interchangeable. In other words, they are goods that consist of many identical parts which can be easily replaced by other, identical goods. If the goods are sold by weight or number, this is a good sign that they are fungible. |||Commodities, common shares, or the same company, and dollar bills are examples of fungibles. Fungibility of listed options makes it possible for buyers and sellers to close out their positions by taking offsetting positions. For example, if you buy a long call option, you can close out the position by selling (writing) a put option with the same underlying, expiration date and strike price.
Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a predetermined period of time. |||Funding agreements are marketed to mutual fund companies and municipal reinvestments. These products are generally used for their security and flexibility as they can be altered to meet the specific cash-flow needs of the contract holder.
A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as: For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95). EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters. Also sometimes known as "price multiple" or "earnings multiple". Watch: PE Ratio Taobiz explains Price-Earnings Ratio - P/E Ratio In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects. The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings. It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.
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