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Welcome to the Marketocracy Glossary   August 02, 2014
   
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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
left curve  glossary of market terms right curve
    If you think the high-tech world is full of "geek-speak" - try learning the lingo of moolah! Here is our glossary of financial terms.
     
left curve  Aa right curve
   

A - The fifth letter of a NASDAQ stock symbol is represented by the letter "A" when it is specifying Class 'A' shares of the company. Nasdaq stocks denoted by an 'A' in the fifth letter are tradeable in the Marketocracy competition.

     
   

ALL OR NONE ORDER (A.O.N.) - An all or none order is a limited price order which is to be executed in its entirety or not at all. If an A.O.N. is not executed, the order is not treated as cancelled. Instead, it is to remain good until executed or cancelled. In the Marketocracy competition this type of order is similar to a limit order that is good til cancelled.

     
   

ALPHA - Alpha is a measure of risk adjusted performance and is usually found by regressing a security's excess return on the S&P 500's excess return. The alpha is the point at which these two intersect. Here is an example... Suppose a mutual fund has an excess return of 30%, with a beta of 3.0, meaning that the fund is three times as risky as the S&P 500. Over the course of the same time period the market excess return is 8%. The expected return given the expected risk should be 3x8%=24%. Because the actual excess return is 30%, the alpha is 30%-24%=6% or 600 basis points. You can use this equation, along with the other ones provided in this glossary, to find the alpha for your Marketocracy fund.

     
   

AMERICAN DEPOSITORY RECEIPT (A.D.R.) - American depository receipts are just like normal shares that you would trade, except that they are shares of foreign companies that are traded on U.S. exchanges and with U.S. currency. Foreign companies choose to issue American depository receipts so as to make it easier for Americans to invest in their companies. One A.D.R. may represent a one or more shares of stock in the foreign company. More specifically, they are certificates issued by a U.S. depositary bank to represent foreign shares held by the bank itself.

     
   

AMERICAN STOCK EXCHANGE (A.M.E.X.) - The American Stock Exchange, which recently merged with the N.A.S.D.A.Q., is the third largest national exchange in terms of volume of trading. Until the 1950s, it was known as the "Curb Exchange," because it originated with brokers meeting on the curb outside the New York Stock Exchange to trades stocks that didn't qualify for the big board. The A.M.E.X. trading floor is now located at 86 Trinity Place in downtown Manhattan, just up the street for the NYSE. The stocks that currently trade on A.M.E.X. are almost all small- an mid-cap in size and most of the trading is in options and other derivatives.

     
   

ANNUAL PERCENTAGE YIELD (A.P.Y.) - This is the actual annual rate of return. The A.P.Y. is the rate that is actually earned/paid in one year. To calculate the A.P.Y. take one plus the periodic rate and raise it to the number of periods in a year. The following is an example... a 3% per month rate has an A.P.Y. of 42.58% (1.03^12 -1). Using this calculation will give you a more accurate perspective of the performance of your Marketocracy fund because it takes into account the affect of compounding.

     
   

ANNUAL RATE OF RETURN - There are actually a couple of ways to calculate the annual rate of return. For instance, if the rate of return is calculated on a monthly basis, it is occassionally multiplied by 12 to express an annual rate of return. You might try to project your Marketocracy fund's annual rate of return to get an idea of what your investments will earn. Keep in mind, however, that using this tool will underestimate the performance of your fund because it does not take into account the effect of compounding.

     
   

ANNUAL REPORT - All publicly held companies issue an annual report to their shareholders, as required by S.E.C. guidelines, or to anyone else who requests one. All of the finanial information in a company's annual report can also be found in its 10-k, a more detailed version of its annual report, but it is generally presented much more legibly in the annual report. A company's annual report will include a description of the firm's operations, a balance sheet, income statement, and cash flow statement. Many investors will want to review such financial documents to judge whether or not a company is investment worthy.

     
   

ANNUALIZED GAIN - Annualized gain is much the same as annual percentage yield or annualized rate of return. If a certain stock appreciates by 3% in one month, the annualized gain for that stock over a twelve month period is 3%*12= 36% or, compounded over that twelve month period, the gain is (1.03)^12-1=42.58%... a pretty good return for any investor. How are your Marketocracy fund's doing?

     
   

ASK - The lowest price an investor will accept to sell a stock is known as his quoted ask. This is basically the quoted offer at which an investor can buy shares of stock. Since the Marketocracy competition is not based on a bid/ask system, but instead sends trades through at market prices, you will not have to worry about such quotes.

     
   

ASYMMETRIC VOLATILITY - This is the phenomenon in which there exists a higher volatility in down markets than in up markets. You can track your volatility by clicking on the "volatility" link for your corresponding Marketocracy fund.

     
   

AT THE OPENING ORDER - An at the opening order is a market order or limit price order that is to be transacted at the opening of a stock and the corresponding opening price. If the trade doesn't occur at the opening of the stock, then any order or portion of the order that has not been executed is in effect, cancelled. This type of order is currently not offered in the Marketocracy competition. Although you can make a market or limit order on the opening of a stock, it will not be cancelled if it does not fill at the corresponding opening price.

     
   

AVERAGE - An average, when applied to stock returns, is an arithmetic mean return of selected stocks with the notion that it is a representation of the market and its behavior. An example of this is the Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number. You can use such averages to try and guage the market or compare your Marketocracy fund's performance to the market average.

     
left curve  Bb right curve
   

B - The fifth letter of a NASDAQ stock symbol is represented by the letter "B" when it is specifying Class 'B' shares of the company. Nasdaq stocks denoted by a 'B' in the fifth letter are tradeable in the Marketocracy competition.

     
   

BANKRUPTCY - When a company is bankrupt it is unable to pay off its debts. The ownership of the company's assets is then transferred from the stockholders to the bondholders. Just like anywhere else, if you should invest in a company that goes bankrupt in the Marketocracy competition you will lose your holdings in the security.

     
   

BANKRUPTCY RISK - This is the risk that a company will not be able to meet its obligations to pay its debts. Bankruptcy risk is also referred to as default risk or insolvency risk. As an investor, you will always want to be aware of a company's ability to "stay afloat".

     
   

BAR - Bar is a slang term for one million dollars. You are given a "bar" to start out each Marketocracy fund in your portfolio.

     
   

BEAR MARKET - A bear market is one in which declining price trends are predominate for an extended period. In such a period the market typically falls by 20% or more. Nobody likes a bear market.

     
   

BEATING THE GUN - To beat the gun is to gain a great price on a trade by having a fast response to market developments. The great competitors in the Marketocracy competition will be able to beat the gun.

     
   

BETA - Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away. It is the measure of a stock's riskiness as compared to the market. A stock with a beta of 2 means that the stock's excess return is expected to move 2 times that of the market. Thus, for this particicular stock, if the market's excess returns are 5%, the expected stock's excess returns are 10%. You can use the formula for beta to analyze securities in your Marketocracy funds. The beta equation used for stocks is below.
{[(n)*(sum of (xy))]-[(sum of x)*(sum of y)]} / {[(n)*(sum of (xx))]-[(sum of x)*(sum of x)]}
In this equation:
n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock
Beta is the slope coefficient when you regress excess returns for stock y onto the excess returns for the market x. You can use this equation to find the beta of the securities that you hold or for your Marketocracy fund.

     
   

BETA EQUATION -

     
   

BID PRICE - The highest price an investor is willing to pay to buy a security is known as his quoted bid. This is basically the quoted offer at which an investor can sell shares of stock. Since the Marketocracy competition is not based on a bid/ask system, but instead sends trades through at market prices, you will not have to worry about such quotes.

     
   

BID-ASK SPREAD - The bid-ask spread is the difference between the bid and asked prices. Again, since the Marketocracy competition is not based on a bid/ask system, but instead sends trades through at market prices, you will not have to worry about such a spread.

     
   

BIG BOARD - The Big Board, or The Exchange, is a nickname for the New York Stock Exchange (N.Y.S.E.). Please view the term New York Stock Exchange for more information.

     
   

BLOCK - A block is a large quantity of stock that is held or traded, usually 10,000 shares or more. With $1 million in your Marketocracy fund you will most likely, at some point, buy blocks of securities.

     
   

BLOCK TRADE - A block trade, as defined on the New York Stock Exchange, is a large order that consists of at least 10,000 shares of a given stock or a total market-value of $200,000 or more. In the Marketocracy competition, you are not allowed to make block trades that comprise more than 25% of your total fund's value. Doing so would be a violation of competition rules and would make your fund ineligible for ranking.

     
   

BLUE CHIP COMPANY - A blue chip company is a large, trusted company. It is a company known for its quality, ability to make money, ability to pay dividends, and wide acceptance of its products or services. Many investors invest in such companies because they are so trusted.

     
   

BOOK VALUE - A company's book value is its total assets minus its liabilities and intangible assets. Some investors look at the book value of a company to decide whether or not they are investment worthy. The ratio of stockholder equity to the average number of common shares is known as the book value per share. Although a useful tool, this should not be used to determine a company's worth, as it is not a indicator of market value.

     
   

BOTTOM-UP EQUITY MANAGEMENT STYLE - This style of equity management focuses on the analysis of individual stocks, as opposed to market cycles. Which ever style you choose is completely up to you, but you can create up to 10 Marketocracy funds to help you decide which suits your tastes.

     
   

BREADTH OF THE MARKET - This term is used when 2/3 of stocks listed on an exchange comprise a particular market move in either direction during a single trading session.

     
   

BUCK INVESTOR - A buck investor is one who believes that the market will rise over the long term and thus uses time as his most valuable asset. The investor will invest for the long run and not for short term gains, knowing that eventually his investment will grow. Try this theory out in the Marketocracy competition and see how you do. Buck investors thrive in buck markets, one in which, over the long run, prices have been in an upward trend. Thus, these markets are kind to those buck investors who buy for the long term and believe that the market will rise over time.

     
   

BULL MARKET - Any market in which there is an upward trend is known as a bull market.

     
   

BUSINESS CYCLE - The business cycle is defined by the repetition of economic expansion and recession. The official cycles are determined by the National Bureau of Economic Research. Some investors believe in the cyclical nature of the economy and tune their investment strategies accordingly.

     
   

BUY AND HOLD STRATEGY - This strategy, from the inception of a portfolio to the end of the investment horizon, incorporates no active buying or selling of stocks. Intead, the investor buys the securities and holds on to them for the long run. You can try this strategy out for yourself with a hypothetical million dollars in the Marketocracy competition.

     
   

BUY LIMIT ORDER - A buy limit order is a conditional order in which a security is to be bought at a specified price or lower. You can use these orders in the Marketocracy competition to specifiy the highest price at which you are willing to buy securities for your fund.

     
   

BUY ON MARGIN - Buying on margin allows an investor to borrow money to buy more shares of a certain stock, using the shares that are bought as collateral for the investment. Buying on margin is prohibited in the Marketocracy comptetition. Using such tools is highly restricted in a mutual fund setting.

     
   

BUYING THE INDEX - To buy the index is to buy the stocks in the S&P 500 in the same proportion so as to achieve the same returns. Although some believe this to be a sound investment strategy, it will not send you to the top ranks of the competitors in the Marketocracy competition. Check out their performances on the Marketocracy rankings page.

     
left curve  Cc right curve
   

C - When a company is exempt from the NASDAQ listing requirements for a certain period the fifth letter of a NASDAQ stock symbol is represented by the letter "C". Nasdaq stocks denoted by a 'C' in the fifth letter are tradeable in the Marketocracy competition.

     
   

CAPITAL ASSET PRICING MODEL - The capital asset pricing model, C.A.P.M., is an economic theory discussed in finance discourse. It describes the relationship between risk and expected return, that the expected return on an investment is equal to a risk-free security plus some risk premium. The riskier the investment, the higher the returns should be. Keep note of this as you compete in the Marketocracy competition.

     
   

CAPITAL GAIN - When you are selling a stock hopefully it is for profit. The profit that you make is the net sales of the stock minus the net cost to buy the stock originally. This profit is known as capital gains. If you lose money when you sell your stock, meaning that the net cost was higher than the net sales, it is known as capital loss. In the Marketocracy competition you are not charged any taxes and thus will not have to worry about your capital gains being taxed.

     
   

CASH COW - A cash cow is a company that pays out most of its earnings as dividends. These companies entice many investors through these dividends.

     
   

CASH DIVIDEND - When a company pays out a cash dividend to its shareholders, it pays it out in the form of cash, which is considered taxable income. The cash distribution does not only include the dividen, but sometimes includes return of capital and capital gains. In the Marketocracy competition, these dividends are noted under the "dividend" column in the ledger.

     
   

CLOSING RANGE - The closing range for a security, also known as the trading range, is the high and low prices recorded during the trading period. You can check the trading range for a stock by using the Marketocracy quote system. Just type a ticker symbol in the quote box to bring up the information.

     
   

COMMISSION - A commission is the fee that is paid to a broker to execute a trade. The amount of the commission usually depends on the number of shares or their dollar value of the trade. To simulate real trading Marketocracy charges a 5 cent/share commission on all trades, except on penny stocks, in which case the commission is 5% of the trade.

     
   

COMMON STOCK - Common stocks are securities that represent an ownership stake in a company. Ownership of such stock gives investors a share of the company's profits either through capital appreciation, if the company does well, or through dividends and allow investors to vote on certain issues that the company faces. Holders of common stock shares, however, are last in line in terms of their claim to dividends, assets, etc.

     
   

COMMON STOCK EQUITY - Common stock equity, also known as shareholders equity, is the value of the outstanding common shares at par, plus all the accumulated retained earnings for those shares. It is the difference between assets and liabilities, or another way of saying net worth.

     
   

COMPOUND INTEREST - Compound interest is interest that is paid not only on the principal, but on all previously earned interest as well. Interest that is earned on your cash holdings in the Marketocracy competition is compounded.

     
   

CONVERTIBLE SECURITY - A convertible security is one that can be converted into some other kind of security at the discretion of the owner of the security. Convertibles securities are often issued by fast growing companies and are attractive to investors who want dividends and the added security of a bond, but also the opportunity for stock gains. Unfortuneately, convertibles are not allowed in the Marketocracy competition.

     
   

CORPORATE ACTION - Corporate actions are certain events that companies enter into, including, but not limited to, stock splits, stock dividends, corporate acquisitions, and corporate mergers. If your Marketocracy fund has a corporate action that you feel is not reflected correctly, please feel free to send an email to help@marketocracy.com.

     
   

CUM DIVIDEND - Cum dividend literally means "with dividend". This term is used when the buyer of a stock is eligible to receive a declared dividend.

     
   

CYCLICAL STOCK - A cyclical stock is a stock that tends to rise and fall with economic cycles. Typically, these stocks rise quickly with an upswing in the economy and fall quickly when there is a downswing in the economy. Cyclical stocks include stocks of firms that make items such as steel and automobiles, as well as airline companies. These companies are all easily affected by the condition and outlook of the economy. It is very tough to invest solely in these stocks because expectations of a downturn can drag these stocks down quickly.

     
left curve  Dd right curve
   

D - The fifth letter of a NASDAQ stock symbol is represented by the letter "D" when it is specifying that the shares are new issue from the company. For example, this could result from a reclassification of the company's stock or from a reverse split. Nasdaq stocks denoted by a 'D' in the fifth letter are tradeable in the Marketocracy competition.

     
   

DAILY VOLUME - The daily volume of a stock, an indication of how liquid a stock is, is the average amount of shares that a company's stock traded over the latest 13-week period. Stocks with a low daily volume generally tend to be riskier than a stock that is highly traded and might mean that there is low interest in the stock.

     
   

DATE OF RECORD - The date of record indicates the date in which shareholders must be of record in a company's stock to be eligible to receive either more shares of stock or cash dividends. As Marketocracy simulates real world trading you must still be careful when investing in companies for their attractive dividends, as you will not receive such rights if you buy them after the date of record.

     
   

DAY ORDER - A day order is an order from a buyer/seller to make a trade that is automatically cancelled the following day if it is not executed. Just as in the Marketocracy competition, all orders are noted as day orders unless specifically entered in as good til cancelled orders or other types of trades. Any day order entered into the Marketocracy system after market close will be executed the next trading day.

     
   

DAY TRADER - A day trader is an investor who buys or sells stock quickly and frequently, investing for short term gains.

     
   

DECLARATION DATE - The declaration date is the date that a company will announce the date and the amount of its next dividend. Many investors who invest for dividends will want to pay close attention to this date.

     
   

DERIVATIVE INSTRUMENT - Examples of derivative instruments are options or futures whose value is derived from something else, namely the underlying asset. Derivatives are not allowed in the Marketocracy competition.

     
   

DILUTION - Dilution bodes bad news to investors as it usually results from the sale of additional shares by a company who has not acquired any new assets. Basically, after dilution, each share has become a smaller stake in ownership of the company.

     
   

DISCOUNTING - Discounting, the antithesis of compounding, is the calculating of the present value of a future amount.

     
   

DIVERSIFICATION - Diversification is the strategy of minimizing unsystematic risk by dividing investment into a variety of securities. Diversification and risk are related in that the more you diversify the less risk you will have. An efficiently diversified portfolio will have the greatest return for a certain amount of risk.

     
   

DIVIDEND - Dividend A dividend is the distribution of earnings to shareholders. A portion of a company's profit paid to common and preferred shareholders. Although dividends might seem attractive, they are not to all investors as they are considered taxable income. Dividends are typically paid by larger companies while smaller companies that are growing tend to reinvest their earnings rather than pay them out. As a real world simulation, Marketocracy takes into account dividends, which are credited on the dividends column in the ledger for the corresponding fund.

     
   

DIVIDEND PAYOUT RATIO - The dividend payout ratio is simply the portion of earnings that is paid out as dividends. This ratio is different for different industries. As an investor, this information would be useful in determining stocks to invest in for income, as companies with a high dividend payout ratio would pay a bigger portion of their earnings out in dividends.

     
   

DIVIDEND REINVESTMENT PLAN - A company's dividend reinvestment plan is its system to automatically reinvest shareholders' dividends in additional shares of the company's stock, often without any commissions, thus offering a way to increase a shareholder's stock holdings at a minimal expense using dollar cost averaging.

     
   

DIVIDEND YIELD - A company's dividend yield is its total dividends over a certain time period divided by it's current price. A high dividend yield can mean that a company is undervalued.

     
   

DIVIDENDS PAID PER SHARE - The dividends paid per share is simply the cash payment of earnings per share of outstanding stock.

     
   

DOW JONES INDUSTRIAL AVERAGE (D.J.I.A.) - The Dow Jones Industrial Average, is probably the most well known and watched index for stock market movements in the United States. The Dow is comprised of 30 of the most established and reputable companies that trade on the New York Stock Exchange and really isn't an average in the normal sense of the word. It is calculated by taking the 30 stocks in the average, adding up their prices, and dividing by a predetermined divisor. This divisor was originally equal to the number of stocks in the average, but it has shrunk over the years to account for stock splits and changes in the roster of companies. For example, when a stock in the Dow splits 3:1, its share price are cut in a third without changes anywhere else. To prevent an arbitrary drop in the Dow whenever a split occurs, the divisor is adjusted downward so the index remains the same before and after the split. It is good to keep an eye on indexes such as this so as to use them as a benchmark for your own performance.

     
   

DOWNGRADE - A downgrade in the ratings for a stock is a negative change that is given by analysts. A stock can be downgraded for any number of reasons, for instance if a company does not meet earnings expectations. Good investors will want to keep an eye on the ratings for the companies they invest or plan to invest in.

     
left curve  Ee right curve
   

E - The SEC requires filings from companies. When a company has not met these requirements, the fifth letter of a NASDAQ stock symbol is represented by the letter 'E'.

     
   

EARNINGS - A company's earnings is just another way to say a company's profits or net income over some time period. A lot of investors look to a company's earnings to decide whether or not they are investment worthy, but it is important not to use this information as the sole reason to invest, as the information could be skewed to reflect positively on a company.

     
   

EARNINGS PER SHARE - Earnings per share is a company's profit divided by the number of common shares outstanding. If a company earned $10 million in one year had 10 million shares of stock outstanding, its earnings per share would be $1 per share. This number represents the amount of the company's earnings that each share is entitled to.

     
   

ELECTRONIC DATA GATHERING, ANALYSIS, AND RETRIEVAL SYSTEM - The electron data gathering, analysis, and retrieval system, otherwise known as EDGAR, is the government's electronic system for collecting and disseminating corporate filings. The Securities and Exchange Commission requires that all public companies post thier corporate filings on EDGAR. Investors will be able find 10-K, 10-Q, and other filings on the internet through this electronic system.

     
   

EQUITY - Equity represents ownership interest in a firm and is the market value of an asset minus the amount that is owed on it when you sell it.

     
   

EX-DIVIDEND - This term literally means "without dividend." and indicates that the buyer is no longer entitled to receive the last declared dividend. Trades that occur between the record date and the payment date occur without the dividend.

     
   

EXCHANGE - An exchange is where a listed secutrity, such as the the stock of a public company, is traded. Probably the most wekll known exchange is the New York Stock Exchange, the N.Y.S.E., but a number of new and large technology companyies trade on the National Association of Securities Dealers Automatic Quotation System, the N.A.S.D.A.Q.

     
   

EXECUTION - To execute a trade is to complete an order or a ticket to either buy or sell a security. When you place trades on Marketocracy, your orders will execute just as they would in real life.

     
   

EXPECTED RETURN - An investor's expected return is equal to some risk free rate plus a risk premium multiplied by the beta of the investor's assets. For a more detailed account of the relationship between expected retun on an investment and risk, please refer to the capital asset pricing model.

     
left curve  Ff right curve
   

F - The fifth letter of a NASDAQ stock symbol is represented by the letter "F" when it is specifying shares of a foreign company. Nasdaq stocks denoted by an 'F' in the fifth letter are tradeable in the Marketocracy competition. In fact, any stocks that trade on the N.Y.S.E., N.A.S.D.A.Q., and A.M.E.X. are tradeable in the competition.

     
   

FEDERAL RESERVE SYSTEM - The Federal Reseve System is the independent, central bank of the United States. It was established in 1913 and is watched over and governed by the Federal Reserve Board which consists of seven members. The system can affect the economy by influencing interest rates, altering the reserve requirements for the nation's banks, and/or by buying or selling Treasury securities. This effectively expands or contracts the nation's money supply and has great bearing on economic growth.

     
   

FILL - The fill is the price that an order is executed. For instance, one would say that stock X filled at price Y.

     
   

FUNDAMENTAL ANALYSIS - Fundamental analysis is an investment strategy that seeks to discover misvalued securities through an analysis of a company's blance sheet, dividend prospects, earnings history, and other factors that affect the company's growth and value.

     
   

FUTURE - A future is a contract used to designate the delivery of a slelected commodity on a specified date at a specified price. This instrument is very risky, as it is simply a way for investors to gamble on how they preceive the direction of the commodity to change. Because the trading of futures contracts is very restricted in a mutual fund setting, they are prohibited in the Marketocracy competition.

     
   

FUTURE VALUE - The value of a sum of cash at a certain point in the future that is equivalent to the value of a sum of cash today is known as its future value.

     
left curve  Gg right curve
   

G - The fifth letter of a NASDAQ stock symbol is represented by the letter "G" when it is specifying the first convertible bond of the company. Nasdaq stocks denoted by an 'G' in the fifth letter are not tradeable in the Marketocracy competition.

     
   

G.D.P. - This acronym stands for Gross Domestic Product.

     
   

G.N.P. - G.N.P. is the acronym for Gross National Product.

     
   

G.T.C. - G.T.C. is the acronym for good 'til cancelled. Please view the entry for this term, as these types of orders are available in the Marketocracy competition.

     
   

GAP OPENING - If a stock has a gap opening, it means that the stock's opening price for the trading period was either much higher or much lower than the closing price from the previous trading period. Gap openings can result, for example, from positive or negative news for the company.

     
   

GOING PRIVATE - In the corporate action in which a publicy traded company "goes private", the publicly owned stock in that company is bought back for equity owernship by some private group. The stock then ceases to trade on the open exchange in which is was listed.

     
   

GOOD 'TIL CANCELLED ORDER (G.T.C.) - A good 'til cancelled order is a market or limit order that is good until it is executed or until you cancel it. This type of order is available in the Marketocracy competition. Because a ticket will not close until it is completely filled, you will want to be careful when making G.T.C. orders for large amounts of shares of stock that trade at a low volume.

     
   

GOOD UNTIL DATE ORDER - A good until date order is a market or limit price order where the order exists for a specified amount of time. The order, or portion thereof, that has not been executed in that time period is to be treated as cancelled. This type of order is not available in the Marketocracy competition.

     
   

GROSS DOMESTIC PRODUCT (G.D.P.) - A country's gross domestic product is the value of the goods and services produced by a nation. Although it excludes the earnings of the nation's corporations and residents that are overseas, it does include the earnings of foreign corporations and residents in that nation.

     
   

GROSS NATIONAL PRODUCT (G.N.P.) - A nation's gross national product measures the economy's total income for that nation. It is similar to the nation's gross domestic product except the fact that it includes the goods and services produced abroad by U.S. residents and companies and exculdes the incomes of foreign companies and residents in the nation.

     
   

GROSS PROFIT - The gross profit of a company is its revenue minus the cost of the goods or services it sold.

     
   

GROWTH RATE - A company's growth rate is the rate at which the company's growth, in terms of such things as its earnings and revenues, has changed or is expected to change. Investors pay close attention, both to a company's earnings and revenues to make their investment decisions.

     
   

GROWTH STOCK - When a company can consistently produce faster than average growth, it is known as a growth stock. These companies tend to have chances to invest money and return more than the opportunity cost of capital. An example of a growth stock is Coca-Cola Co. Different investors will look to invest in different types of stocks, depending on a multitude of reasons, including their investment goals.

     
left curve  Hh right curve
   

H - The fifth letter of a NASDAQ stock symbol is represented by the letter "H" when it is specifying the second preferred bond of the company. Nasdaq stocks denoted by an 'H' in the fifth letter are not tradeable in the Marketocracy competition.

     
   

HEAD AND SHOULDERS - Usually reflecting negatively on a stock, head and shoulders is a term in technical analysis given to a chart pattern in which a stock price peaks, declines, rises to a second peak higher than its first, declines, rises to another peak lower than the second, and declines. The first and third peak represent the shoulders while the second peak represents the head.

     
   

HEDGING - The idea behind hedging is to reduce and minimize investment risk. This method incorporates such tools as call options, put options, futures contracts, and/or short selling. For example, investors might hedge against losses by buying a put option for a stock that they own so that in case the stock's value should go down, the option's value will go up. Unfortunately, hedging is not possible in the Marketocracy competition because the tools used to accomplish this method of investing are not allowed.

     
   

HIGH PRICE (for a stock) - A stock's high price is the highest price the stock has hit over the course of the past trading period.

     
   

HORIZON ANALYSIS - A horizon analysis of assets incorporates the total return to determine the guage the performance of that asset over an investment horizon.

     
left curve  Ii right curve
   

I - The fifth letter of a NASDAQ stock symbol is represented by the letter "I" when it is specifying the third preferred bond of the company. Nasdaq stocks denoted by an 'I' in the fifth letter are not tradeable in the Marketocracy competition.

     
   

I.P.O. - I.P.O. is the acronym for initial public offering.

     
   

IDIOSYNCRATIC RISK - Idiosyncratic risk is risk that is unassociated with the overall market risk. Thus, this risk has only to do with the specific risk that the company faces. To be in the top tiers of competitors in the Marketocracy competition, an investor will have to diversify away idiosyncractic risk.

     
   

INCOME STOCK - Icome stocks, which tend to be less volatile, are stocks with a high dividend yield that investors typically buy for the purpose of using them as income. This type of stock can combine the security of a bond with the chance of capital appreciation. Drawbacks of owning such stocks are that their dividends are treated as taxable income and that they are sensitive to both inflation and rising interest rates.

     
   

INDEX - An index is basically a collection of stocks with the intent of measuring the changes of the economy. The most well known indexes are probably the Down Jones Industrial Average and the Standard & Poor's 500.

     
   

INDEX FUND - An index fund is a mutual fund that attempts to match the returns of some market index, for instance the S&P 500, by carry the same securities. Investors that follow this investment strategy most likely will not be the best performers in the Marketocracy competition, as the top competitors have beaten the market every quarter so far.

     
   

INDICATOR - An indicator, such as the trading of corporate insiders or the movement of interest rates, is a tool that investors or analysts use to forecast the market's direction.

     
   

INFLATION - Inflation is the rate at which the prices of goods and services in an economy is rising.

     
   

INITIAL PUBLIC OFFERING - An initial public offering by a company is the initial offering by a company to the public as an investment opportunity. Companies are only allowed to make such an offering after having satisfied the requirements as set by the S.E.C.

     
left curve  Jj right curve
   

J - The fifth letter of a NASDAQ stock symbol is represented by the letter "J" when it is specifying that the shares are voting shares of the company. Nasdaq stocks denoted by a 'J' in the fifth letter are tradeable in the Marketocracy competition.

     
left curve  Kk right curve
   

K - The fifth letter of a NASDAQ stock symbol is represented by the letter "K" when it is specifying that the shares are not voting shares of the company. Nasdaq stocks denoted by a 'K' in the fifth letter are tradeable in the Marketocracy competition.

     
left curve  Ll right curve
   

L - The fifth letter of a NASDAQ stock symbol is represented by the letter "L" when it is specifying classes of shares such as the sixth class of preferred stock or foreign preferred shares of the company. Nasdaq stocks denoted by a 'L' in the fifth letter are tradeable in the Marketocracy competition.

     
   

LAST - The last trading price for a stock is what a share of the stock is currently trading for on the market. You can find the last trading price for a stock by entering in the ticker symbol for the stock in the "quick quote" box on the Marketocracy page.

     
   

LEVERAGE - Leverage is the use of debt financing to increase increase the returns of a company. An investor will want to be careful when leveraging his investments because if one of his stock falls, his loan's collateral will not be adequate. Leveraging is not possible in the Marketocracy competition

     
   

LIMIT ORDER - A limit order is an order to buy shares of a security at a specified price or lower, or sell shares of a security at a specified price or higher. There are certain advantages and drawbacks of using such a tool however. One advantage is that you have the opportunity to get the price that you want to buy or sell your stock. The drawback is that if, for example, you want to sell shares of a stock at a certain price and the price just keeps falling and falling, you will have lost the opportunity to sell at a higher price. Limit orders are available in the Marketocracy competition.

     
   

LIMIT PRICE - A limit price is the investor's specified price at which to buy or sell a stock. A buy can occur at this limit price or lower and a sell can occur at this limit price or higher. Limit trades are available in the Marketocracy competition.

     
   

LIQUIDITY - Liquidity refers to how easily an asset can be converted into cash. In regards to the market, liquidity refers to trading volume and how easily a stock can be traded away.

     
   

LOW PRICE (for a stock) - A stock's low price is the lowest price the stock has hit over the course of the past trading period.

     
left curve  Mm right curve
   

M - The fifth letter of a NASDAQ stock symbol is represented by the letter "M" when it is specifying the fourth class of preferred shares of the company. Nasdaq stocks denoted by a 'M' in the fifth letter are tradeable in the Marketocracy competition.

     
   

MARKET CAPITALIZATION - A company's market capitalization is the value of all its outstanding shares. To find this figure, which is basically a measure of the size of the company, multiply the number of outstanding shares to the current price of the shares.

     
   

MARKET ORDER - A market order is an order to trade a specified amount of shares of a stock at the best available price possible. This type of order, of course, is available in the Marketocracy competition.

     
   

MARKET PRICE - The market price of a security is the price at which a security would change hands from one party to another assuming that both parties have all the pertinent information to make their decisions.

     
   

MOST ACTIVE LIST - The most active list is comprised of the most heavily traded stocks in a given trading period.

     
   

MOVING AVERAGE - The moving average of a stocks represents the average price of that security in the time span from a few days to a few years and indicates the stock's price trend. Technical analysts use a company's moving average to determine whether to buy or sell a stock, as an indication to buy is when the short-term moving average rises above the long-term moving average and an indication to sell is when the short-term moving average falls below the long-term moving average.

     
   

MUTUAL FUND - A mutual fund is a pool of money used to invest in different securities depending on the goals of the fund. Here in the Marketocracy competition, you are given the charge to create your own fund with one million dollars of fantasy cash with the goal of becoming one of the top investors in the competition by accruing the highest returns.

     
left curve  Nn right curve
   

N - The fifth letter of a NASDAQ stock symbol is represented by the letter "N" when it is specifying the third class of preferred shares of the company. Nasdaq stocks denoted by a 'N' in the fifth letter are tradeable in the Marketocracy competition.

     
   

NAKED CALL - A naked call is an option in which an investor sells a stock that he doesn't own and is very risky because the liability is unlimited. Because the use of this type of investment tool is very restricted in a mutual fund setting, it is prohibited in the Marketocracy competition.

     
   

NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM - The N.A.S.D.A.Q. is an eletronic stock exchange that houses many of the largest companies in the U.S. It is run by the National Association of Securities Dealers, N.A.S.D., and has no trading floor. Instead, the N.A.S.D.A.Q., which was founded in 1971, orders are sent out over a network of computers where prices are given in which investors are willing to buy and sell specific stocks. The two parts of the N.A.S.D.A.Q. are the Nasdaq National Market, in which companies are required to meet listing requirements, and the Nasdaq SmallCap Market, composed of companies who aren't big enough to trade in the Nasdaq National Market.

     
   

NAV - NAV is the acronym for net asset value, which is the guage that Marketocracy uses to determine performance.

     
   

NET ASSET VALUE - Net asset value is the current value of a share of a mutual fund and is computed by taking assets minus liabilities and dividing by the number of outstanding shares of the fund. Marketocracy uses NAV as its sole guage for performance in the competition.

     
   

NEW YORK STOCK EXCHANGE (N.Y.S.E.) - The New York Stock Exchange, otherwise known as the Big Board and the Exchange, is the oldest and probably the most well known stock exchange. Trades take place on a trading floor and orders are shouted out by traders on the floor. The NYSE holds the most stringent requirements for listing.

     
   

NONSYSTEMATIC RISK - Nonststematic risk is firm specific risk that can be diversified away. To be atop the ranks in the Marketocracy competition you will need to be able to effectively eliminate this risk through the use of diversification in your fund.

     
left curve  Oo right curve
   

O - The fifth letter of a NASDAQ stock symbol is represented by the letter "O" when it is specifying the second class of preferred shares of the company. Nasdaq stocks denoted by a 'O' in the fifth letter are tradeable in the Marketocracy competition.

     
   

OPENING - The opening is the beginning of the current trading session as designated by the exchange.

     
   

OPPORTUNITY COST - The opportunity cost is the returns foregone from putting money in one investment rather than another. Smart investors will weigh the consequences of their investment actions carefully before committing their capital.

     
   

OPTION - Options are contracts that give the buyer the right to buy or sell a stock at a specified price on on a specified date. Options are issued by investors, where an option to buy is a call and an option to sell is a put. This investment tool is not available in the Marketocracy competition as such trading is highly restricted in the context of mutual funds.

     
   

ORDER - An order is an instruction to either buy or sell a security. When you enter in an order in the Marketocracy competition you are requesting that a trade, buy or sell, be executed in your fund.

     
   

OVER-THE-COUNTER MARKET - The over-the-counter market consists of all the stocks that are not traded on a major exchange. These stocks tend to be of smaller, riskier companies and trades are conducted over the telephone or via computers. Most of these stocks are available to trade in the Marketocracy competition.

     
   

OVERPERFORM - When a stock overperforms it exceeds the growth or earnings expectations of the market.

     
left curve  Pp right curve
   

P - The fifth letter of a NASDAQ stock symbol is represented by the letter "P" when it is specifying the first class of preferred shares of the company. Nasdaq stocks denoted by a 'P' in the fifth letter are tradeable in the Marketocracy competition.

     
   

PAYOUT RATIO - A stock's payout ratio is the ratio of the company's earnings that is paid out in the form of dividends.

     
   

PENNY STOCK - A penny stock is one that usually trades for under one dollar and does not trade on a major exchange. These stocks are very risky, highly speculative, and most are allowed to be traded in the Marketocray competition.

     
   

PNK SHEETS - Pink sheets are the daily quotes for the over-the-counter stocks that are traded. The name is derived from the fact that these quotes are printed on pink paper, which makes them less efficient than the systems utilized by major exchanges. There is, however, an electronic version of these quoted known as the Over The Counter Bulletin Board (O.T.C.B.B.).

     
   

PORTFOLIO TURNOVER - Portfolio turnover is used to guage the amount of trades a fund is doing. To calculate portfolio turnover, take the lesser of the buys or sells for a fund and divide that number by the average monthly assets. In most cases, a lower turnover ratio is preferred, as a higher turnover ratio could mean high trading costs.

     
   

PREFERRED STOCK - A preferred stock is a stock which gives equity ownership to its holder and usually also pays fixed dividends as well. In terms of claims to a company's earnings and assets in the case of liquidation, preferred stock holders come before common stock holders. These stocks are tradeable inthe Marketocracy competition.

     
   

PRICE/EARNINGS RATIO - The price per earnings ratio is calculated by taking the current price of a stock and dividing it by the earnings per share from the most recent 12-month period. A higher number resulting from this calculation indicates higher expectations for a stock, while the opposite is true as well.

     
left curve  Qq right curve
   

Q - The fifth letter of a NASDAQ stock symbol is represented by the letter "Q" when it is specifying that the company is in bankruptcy proceedings. Nasdaq stocks denoted by a 'Q' in the fifth letter are tradeable in the Marketocracy competition.

     
left curve  Rr right curve
   

R - The fifth letter of a NASDAQ stock symbol is represented by the letter "R" when it is specifying that the stock has rights. What this basically means is that the holders of these shares are allowed to purchase shares of a new issue of common stock before it is available to the public, usually at a discount. Nasdaq stocks denoted by a 'R' in the fifth letter are tradeable in the Marketocracy competition.

     
   

RALLY - A rally in the market is a recovery of the stock prices after having sustained losses earlier in the trading period.

     
   

RANGE - The range of a stock's prices is the high and low prices for that stock in a given tading period. You can find the range of a stock through the use of Marketocracy's "quick quote" by typing in the ticker symbol in the appropriate quick quote box.

     
   

RATE OF RETURN - The rate of return on an investment is calculated by taking the current value of the investment, minus the original cost of the investment, divided by the original cost of the investment. The real rate of return is adjusted for inflation as well. To calculate the real rate of return just subtract the rate of inflation from the rate of return that was calculated from above.

     
   

REAL INTEREST RATE - The real interest rate is the nominal rate of interest adjusted for inflation.

     
   

RECORD DATE - The record date is the date by which an investor must own the shares of a stock in order to receive a dividend. If shares of stock is purchased after this date the investor will not receive the dividend.

     
   

RELATIVE STRENGTH - The relative strength of a stock is its price movement as compared to a market index over a one year period. To calculate the relative strength take the current stock price divided by the stock price a year a ago and divide that number by the current index price divided by the price of the index from a year ago. Stocks show either a relative strength in price movement, where the value of the relative strength is greater than 1, or a relative weakness in price movement, where the value of the relative strength is less than 1.

     
   

RETAINED EARNINGS - The retained earnings of a company represents the amount of earnings that is plowed back into the company as opposed to being distributed as dividends to its shareholders.

     
   

RETURN ON ASSETS - An investors return on assets is an indicator of the profitability of the investments and is calculated by taking the investor's income from the last 12 month period divided by the assets from the most recent quarter.

     
   

RETURN ON EQUITY - Return on equity, another indicator of profiability and also one of the most widely used tools in deciding how a company is doing, is calculated by taking the net income for the past 12 month period and dividing it by the common stock equity.

     
   

REVERSE STOCK SPLIT - A reverse stock split represents a decrease in the amount of shares outstanding, all the while keeping the total value of shares unchanged. Thus, the percentage of a shareholder's equity in a company that has a reverse stock split remains constant. Although the amount of shares diminishes, their value increases proportionately.

     
   

RISK - Risk is the uncetertainty of return on an investment or the variability of return on investment. As an investor it will be critical to understand and weigh the risks of investments so that you can find a balance between risk and return that you are comfortable with or that meets your goals.

     
   

RISK AVERSE - An investor is said to be risk averse if, when presented with two investments with equal expected returns, the investor chooses the investment that is less risky. Risk averse is the opposite of risk loving.

     
left curve  Ss right curve
   

S - The fifth letter of a NASDAQ stock symbol is represented by the letter "S" when it is specifying that the shares of the company have beneficial interst. Nasdaq stocks denoted by a 'S' in the fifth letter are tradeable in the Marketocracy competition.

     
   

S.E.C. - S.E.C. is an acronym for the Securities and Exchange Commission.

     
   

S.P.D.R.s (Spiders) - S.P.D.R. is the acronym for Standard & Poor's Depositary Receipt. These "Spiders", which trade on the American Stock Exchange under the symbol SPY, are are intended to track the value of the Standard & Poors 500 Composite Price Index. The value of a share of a SPDR is about one tenth the value of the S&P 500. Spiders are fully tradeable in the Marketocracy competition.

     
   

SECONDARY MARKET - After a company's initial offering in the primary market, its shares trade in the secondary market, which consists of all the exchanges, including the NYSE and Nasdaq.

     
   

SECURITIES AND EXCHANGE COMMISSION (S.E.C.) - The Securities and Exchange Commission is a federal agency that has the responsibility of regulating the U.S. securities markets. Formed in 1934, the S.E.C., a federal agency, promotes full disclosure by companies of their actions and intentions to protect the public against malpractice.

     
   

SHARE - A share is a certificate representing ownership in a company. In the Marketocracy competition you trade shares just as you would in real life.

     
   

SHAREHOLDERS' EQUITY - A company's shareholders' equity is the same thing as its net worth, namely its assets less its liabilities. This is also known as a company's book value.

     
   

SHARPE RATIO - The Sharpe Ratio is a risk adjusted measure of how well a mutual fund performs by calculating the excess returns of a fund beyond that of an investment that is risk free.

     
   

SHORT SELLING - Short selling involves selling shares that an investor does not own. When an investor sells short, they borrow shares of a security from a broker and sell those shares in hopes that the market for that security will fall. They are then obligated to buy back those shares at market price. Thus, short selling investors hope to buy back shares for less than they sold them for and profit from the difference. Shorting is not allowed in the Marketocracy competition because its use it highly restricted in a mutual fund setting.

     
   

SPIDER - Spider is the term given to an S.P.D.R. or a Standard & Poor's Depositary Receipt.

     
   

SPIN-OFF - When a company has a spin-off, it creates an independent company from a current subsidiary and does so by distributing or selling shares of the new company to its current shareholders. Spin-offs are accounted for in the Marketocracy competition just as they would in real life.

     
   

SPLIT - When a company splits the number of shares in its stock, it a larger number of shares from the outstanding shares before. Although the resulting price of the stock is split, shareholders receive the proportionate amount of shares so that they are no better or worse off than they were before. If a company held a 2 for 1 split and had an original 1 million shares, it would have a post split number of 2 million shares. In addition, if a shareholder had 100 shares of stock in the company, which was trading at $100 dollars before the split, he would then own 200 shares of the stock and it would trade at $50 post split. Splits are accounted for in the Marketocracy competition just as they would be in real life.

     
   

STANDARD & POOR'S 500 (S&P 500) - The Standard & Poor's 500 Stock Index is an index run by the S&P advisory services division of McGraw-Hill. The index consists of 500 large companies, 400 industrial firms, 40 financial stocks, 40 utilities and 20 transportation stocks, and is one of the most widely followed benchmarks of stock market performance.

     
   

STOCK DIVIDEND - When a company issues a stock dividend, it is issuing a dividend in the form of additional shares of stock in the company instead of in cash. Companies tend to issue stock dividends so that cash that is needed to operate the company is conserved. Stock dividends are accounted for in the Marketocracy competition just as they are in real life.

     
   

STOCK MARKET - The stock market is a market for trading equities. The Marketocracy competition is focused on finding the best investors of the stock market. These members will be rewarded with a professional money manager position with Marketocracy.

     
   

STOCK REPURCHASE - In a stock repurchase a company buys back its outstanding shares of common stock from shareholders.

     
   

STOP ORDER - A stop order is an order to sell a stock when a stock's price falls to the price specified in the order. This type of order is not currently available in the Marketocracy competition.

     
left curve  Tt right curve
   

T - The fifth letter of a NASDAQ stock symbol is represented by the letter "T" when it is specifying that the stock has rights or warrants. Nasdaq stocks denoted by a 'T' in the fifth letter are tradeable in the Marketocracy competition.

     
   

TECHNICAL ANALYSIS - Technical analysis is a method some analysts and investors use to try and find patterns in a stock through its trading history. To do this, technical analysis incorporates tools such as complex charting techniques.

     
   

TENDER OFFER - When a company makes a tender offer, they make an offer to their shareholders to buy back their stock. Usually, the price that is offered in a tender offer is higher than the current market price to entice shareholders to sell.

     
   

THINLY TRADED - A stock is said to be thinly traded when its trading volume is low.

     
   

TICKER SYMBOL - A stock's ticker symbol is the symbol that it trades under on an exchange.

     
left curve  Uu right curve
   

UNDERPERFORM - When a stock underperforms it does not meet the growth or earnings expectations of the market.

     
left curve  Vv right curve
   

V - The fifth letter of a NASDAQ stock symbol is represented by the letter "V" when it is specifying that these shares are when issued. Nasdaq stocks denoted by a 'V' in the fifth letter are tradeable in the Marketocracy competition.

     
   

VALUE STOCK - When a stock is undervalued by the market, it is known as a value stock. These stocks will usually have very tasty financials and present a potential investor with good ratios and numbers. Care must be taken, however, as these numbers may be misleading and other factors may not have been accounted for.

     
   

VENTURE CAPITAL - Venture capital is sought by start-up companies seeking investment capital to fund their prospects and ideas. These companies typically do not have access to capital markets.

     
   

VOLATILITY - Volatility associates the risk of holding a security to a duration of time. The volatility of a stock measures the tendency for that security to move drastically in the market for that period of time. Less volatile stocks are more stable while the opposite, more volatile stocks, are less stable.

     
   

VOLUME - The volume of a stock represents the total amount of shares that is traded in the latest trading period. Technical analysts use this information as an indicator for a stock, as rising prices along with a rising volume is a positive indicator and falling prices along with a falling volume is viewed as negative. You can view the tradig volume of a stock by entering in the stock's ticker symbol in the "quick quote" box found on the Marketocracy web site.

     
left curve  Ww right curve
   

W - The fifth letter of a NASDAQ stock symbol is represented by the letter "W" when it is specifying a warrant issued by a company. Nasdaq stocks denoted by a 'W' in the fifth letter are not tradeable in the Marketocracy competition.

     
   

WARRANT - A warrant is a security that guarantees its owner the right to buy an amount of stock at some specified price, usually higher than the current market price, at some specified future date. Warrants, unlike call options, are issued by individual companies and are traded on an exchange as a security whose price represents the value of the underlying stock. These types of securities, warrants and put/call options, are not available in the Marketocrac competition, as their use is very restricted in a mutual fund setting.

     
   

WHEN ISSUED - When a stock enters into a corporate action, when issued transactions represent a transaction that has been made before the security has been issued. For instance, a stock that has been split or a company that is completing a merger is traded on a when issued basis.

     
left curve  Xx right curve
   

X - The fifth letter of a NASDAQ stock symbol is represented by the letter "X" when it is specifying a mutual fund. Nasdaq stocks denoted by a 'X' in the fifth letter are not tradeable in the Marketocracy competition.

     
left curve  Yy right curve
   

Y - The fifth letter of a NASDAQ stock symbol is represented by the letter "Y" when it is specifying that the shares are A.D.R.'s. Nasdaq stocks denoted by a 'Y' in the fifth letter are tradeable in the Marketocracy competition.

     
   

Yield - Yield is the percentage rate of return paid on a security through dividends. For example, a company that trades at $100 and has total annual dividends of $5 has a yield of 5%.

     
left curve  Zz right curve
   

Z - The fifth letter of a NASDAQ stock symbol is represented by the letter "Z" when it is specifying the fifth class of preferred shares of the company, a second class of warrants, foreign preferred when issued, or a certificate representing a limited partnership interest. Nasdaq stocks denoted by a 'Z' in the fifth letter are tradeable in the Marketocracy competition