Beta

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market return of an asset based on its beta and expected market returns.

Beta is calculated using regression analysis, and you can think of beta as the tendency of a security’s returns to respond to swings in the market. A beta of 1 indicates that the security’s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market. Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering than possibility of a higher rate of return, but also posing more risk.

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Dollar-Cost Averaging – DCA Mean?

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

Also referred to as a constant dollar plan.

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Yield Curve

A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.

The shape of the yield curve is closely scrutinized because it helps to give an idea of future interest rate change and economic activity.

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Sovereign Bond

A debt security issued by a national government within a given country and denominated in a foreign currency. The foreign currency used will most likely be a hard currency, and may represent significantly more risk to be bondholder.

The government of a country with an unstable economy will tend to denominate its bonds in the currency of a country with a stable economy will tend to denominate its bonds in the currency of a country with a stable economy.

Because of default risk, sovereign bonds tend to be offered at a discount. Brady bonds, which are issued by governments in developing countries, are a popular example of sovereign debt securities.

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Tenor

The amount of time left for the repayment of a loan or contract or the initial term length of a loan. Tenor can be expressed in years, months or days.

Tenor is sometimes used interchangeably with “maturity”, although tenor is not often used to describe the terms of fixed-income instruments such as government bonds and corporate bonds. Instead, non-standardized contracts like insurance policies and bank loans tend to be described in terms of tenor.

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Yield to Maturity

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate.

The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as “yield” for short.

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Yield

The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.

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Market Psychology

The overall sentiment or feeling that the market is experiencing at any particular time. Greed, fear, expectations and circumstances are all factors that contribute to the group's overall investing mentality or sentiment. While conventional financial theory describes situations in which all the player in the market behave rationally, not accounting for the emotional aspect of the market can sometimes lead to unexpected outcomes that can't be predicted by simply looking at the fundamentals. Technical analysts use trends, patterns and other indicators to assess the market's current psychological state in order to predict whether the market is heading in an upward or downward direction.

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Trend

Trends can vary in length from short, to intermediate, to long term. If you can identify a trend, it can be highly profitable, because you will be able to trade with the trend.
As general strategy, it is best to trade with trends, meaning that if the general trend of the market is headed up, you should be very cautious about taking any positions that rely on the trend going in the opposite direction.
A trend can also apply to interest rates, yields, equities and any other market which is characterized by a long-term movement in price or volume.

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Economic Cycle

The natural fluctuation of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, levels of employment and consumer spending can help to determine the current stage of the economic cycle.

An economy is deemed to be in the expansion stage of the economic cycle when gross domestic product (GDP) is rapidly increasing. During times of expansion, investors seek to purchase companies in technology, capital goods and basic energy. During times of contraction, investors will look to purchase companies such as utilities, financials and healthcare.

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