Quantity Theory Of Money

An economic theory which proposes a positive relationship between changes in the money supply and the long-term price of goods. Increasing the amount of money in the economy will eventually lead to an equal percentage rise in the prices of products and services. The calculation behind the quantity theory of money is based upon Fisher Equation, calculated as:

M x V = P x T

M: the money supply.

V: velocity of money.

P: average price level.

T: volume of transactions in the economy.

According to how the formula is derived, holding the transaction volume and velocity of money constant, any increases in the money supply will yield a proportional increase in the average price level.

Source: http://www.investopedia.com/terms/q/quantity_theory_of_money.asp

Red Chip

A company based in Mainland China that is incorporated internationally and listed in the Hong Kong Stock Exchange. Red chip stocks are expected to maintain the filing and reporting requirements of the Hong Kong exchange, which makes them a main outlet for foreign investors who wish to participate in the rapid growth of the Chinese economy.

Red chips may be issued in addition to A-shares in the same companies, although only Chinese citizens can invest in A-shares.

Thirty red chip stocks (a reference to the color of China’s flag) make up the Hang Seng China-Affiliated Corporations Index, which appreciated rapidly in the 2002-2007 time frame. As a sign of the pent-up demand among mainland Chinese citizens for Chinese stocks, the A-shares they are permitted to invest in often have 30-50% premiums compared to red chips for the exact same companies.

Source: http://www.investopedia.com

Bottom

The lowest point or price reached by a financial security, commodity, index or economic cycle in a given time period, which is followed by a steady increase.

If a stock has “bottomed out” it means it has reached its low point and is now in the early stages of an upward trend. The bottom is the lowest level of support when charting a stock, commodity, index or economic cycle.

Source: http://www.investopedia.com

Consolidation

In technical analysis, the movement of an asset’s price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base. The levels of resistance and support within the consolidation are created through the upper and lower bounds of the stock’s price. Once the price of the asset breaks through the identified areas of support or resistance, volatility quickly increases and so does the opportunity for short-term traders to generate a profit.

Source: http://www.investopedia.com

Chapter 11

Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs and assets. It is generally filed by corporations which require time to restructure their debts.

Chapter 11 gives the debtor a fresh start, subject to the debtor’s fulfillment of its obligations under its plan of reorganization is the most complex of all bankruptcy cases and generally the most expensive. It should be considered only after careful analysis and exploration of all other alternatives.

Source: http://www.investopedia.com

Asset Stripper

An individual or company, which purchases a corporation with the intention of dividing that corporation up into its parts and selling these parts for profit. An asset stripper will determine if the value of a company is worth more as a whole or as separate assets. Usually the asset stripper sells some assets off immediately then sells the functioning portion of the business later.

Source: http://www.investopedia.com

VIX – CBOE Volatility Index

The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a qide range of S & P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”.

There are three variations of volatility indexes: the VIX tracks the S & P 500, the VXN tracks the Nasdaq 100 and the VXD tracks the Dow Jones Industrial Average.

Source: http://www.investopedia.com

A-Shares

Shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are generally only available for purchase by mainland citizens; foreign investment is only allowed through a tightly-regulated structure known as the Qualified Foreign Institutional Investor (QFII) system.

Most companies listed on Chinese exchanges will offer two shares classes: A-shares and B-shares. B-shares are quoted only in foreign currencies (such as the U.S. dollar) and are open to both domestic and foreign investment (provided that locals set up a foreign currency account), while A-shares are only quoted in Chinese renminbi.

The peoples’ Republic of China is working to blend the two classes of stock together, and eventually allow direct foreign investment in mainland companies. It is one of many major financial reforms that the advanced economies of the world hope will occur in the next several years; there is a tremendous amount of pent-up demand for Chinese equity, provided that the regulations become uniform and reporting requirements are in-line with global standards.

Source: http://www.investopedia.com

Cash for Clunkers

A term used to describe a program that allows car owners the ability to trade in their old, less fuel-efficient vehicle in exchange for a more fuel-efficient vehicle. Although commonly referred ro as 'cash for clunkers,' the formal name for the program in the U.S. is the Car Allowance Rebate System (CARS). The CARS program gives people who qualify a potential credit of up to $4,500 depending on the vehicle purchased. CARS was signed into law by President Obama and will be administered by the National Highway Trafic Safety Administration (NHTSA).

Source: http://www.investopedia.com/terms/c/cash-for-clunkers.asp

Exchange-Traded Fund - ETF

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throuhout that day as they are bought and sold.

Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like mutual fund does.

By owning ETF, you get the diversification of an index fund as well as the ability to sel short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.

Source: http://www.investopedia.com/terms/e/etf.asp