Bear Trap
A false signal that the rising trend of a stock or index has reversed when it has not.
This can occur during a bear market reversal when short sellers believe the markets will sink back to its declining ways. If the market continues to rise, the short sellers get trapped and are forced to cover their positions at higher prices.
Assets Under Management – AUM
In general, the market value of assets an investment company manages on behalf of investors.
There are widely differing views on what the term means. Some financial institutions include bank deposits, mutual funds and institutional money in their calculations. Others limit it to funds under discretionary management where the client delegates responsibility to the company.
Arm’s Length Transaction
A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.
The concept of an arm’s length transaction commonly comes into play in the real estate market. When determining the fair market value of a piece of property, the price for the property must be obtained through a potential buyer and seller operating through an arm’s length transaction, otherwise, the agreed-upon price will likely differ from the actual fair market value of the property.
For example, if two strangers are involved in the sale and purchase of a house, it is likely that the final agreed-upon price will be close to market value (assuming that both parties have equal bargaining power and equal information about the situation). This is because the seller would want a price that is as high as possible and the buyer would want a price that is as low as possible.
This contrasts with a situation in which the two parties are not strangers. For example, it is unlikely that the same transaction involving a father and his son would yield the same result, because the father may choose to give his son a discount.
Alternative Asset
A term referring to any non-traditional asset with potential economic value that would not be found in a standard investment portfolio. Due to the unconventional nature of some of these investment assets, valuation may be a problem.
For most people, examples of alternative assets would include art and antiques, precious metals, fine wines, rare stamps and coins, and other collectibles such as sports cards. However, to the very wealthy, hedge funds, venture capital-related projects and infrastructure could be alternative assets. In either case, alternative assets tend to be less liquid than traditional investments. Thus, investors who favor alternative assets will have to consider a very long investment horizon.
A shares: companies incorporated in mainland China and are traded in the mainland A-share markets. The prices of A shares are quoted in Renminbi, and currently only mainlanders and selected foreign institutional investors are allowed to trade A shares.
B shares: companies incorporated in mainland China and are traded in the mainland B-share markets (Shanghai and Shenzhen). B shares are quoted in foreign currencies. In the past, only foreigners were allowed to trade B shares. Starting from March 2001, mainlanders can trade B shares as well. However, they must trade with legal foreign currency accounts.
H shares: companies incorporated in mainland China and are listed on the Hong Kong Stock Exchange and other foreign stock exchanges.
Zero-Coupon Bond
A debt security that doesn’t pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.
Also known as an “accrual bond”.
Some zero-coupon bonds are issued as such, while others are bonds that have been stripped of their coupons by a financial institution and then repackaged as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price much more than coupon bonds.
Zero-Sum Game
A situation in which one participant’s gains result only from another participant’s equivalent losses. The net change in total wealth among participants is zero; the wealth is just shifted from one to another.
Options and future contracts are examples of zero-sum games (excluding costs). For every person who gains on a contract, there is a counter-party who loses. Gambling is also an example of a zero-sum game.
Year -To-Date
Definition
YTD. For the period starting January 1 of the current year and ending today.
Year Over Year – YOY
A method of evaluating two or more measured events that compares the results of measurement at one time period with those from another time period (or series of time periods), on an annualized basis. Year-over-year comparisons are a popular way to evaluate the performance of investments. Any measurable events that recur annually can be compared on a year-over-year basis – from annual performance, to quarterly performance, to daily performance.
Year-over-year performance is frequently used by investors seeking to gauge whether a company’s financial performance is improving or worsening. For example, a business may report that its revenues have increased for the third quarter on a year-over-year basis for the last three years. This means that revenues at that company in the third quarter of year 3 were higher than revenues in the third quarter in year 2, which were higher than revenues in the third quarter of year 1.
As another example, a mutual fund that returned 50% last year may have a YOY return of 12%, as the year-over-year return takes into account each annual return since the fund’s inception.
yield curve
Definition
A curve that shows the relationship between yields and maturity dates for a set of similar bonds, usually Treasuries, at a given point in time.
Related Terms
flat yield curve, normal yield curve, inverted yield curve
Related Research Articles from the InvestorGuide.com University
Corporate Bonds
Thinking of buying a bond issued by a corporation? Learn the basics about corporate bonds as well as how to evaluate the yield, maturity, duration, rating, callability and convertibility.
Treasury Bonds
Learn about Treasury Bonds, Treasury Notes, CPI-Indexed Treasury Notes (TIPS) and Treasury Bills. Find out about the pros and cons of these kinds of investments.
Other Types of Bonds
Find out about bonds issued by mortgage associations, savings bonds, Brady bonds, as well as those issued by other government agencies, and what the advantages and disadvantages of each type are.