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An abbreviation used in stock listings of newspapers to indicate that items, such as dividends, were declared or occurred in the preceding 12 months.

Each Way
Commissions made by a broker who was involved in both the buy and the sell side of a transaction.

Early Withdrawal Penalty
An assessment charged to an investor when they withdraw their money from a fixed-term investment before its maturity. For example, if investors who have a one year certificate of deposit withdraw their money after eight months, the banking institution would assess a penalty.

Earned Before Taxes
A corporation's earnings after bond interest has been paid but before it pays taxes.

Earned Income
Income generated from employment, pensions or annuities--for example, wages, salary, commissions, bonuses, IRAs, etc.

The amount of profit a corporation receives after expenses and taxes are paid.

Earnings Before Interest and Taxes (EBIT)
A corporation's earnings before it pays bond interest and taxes.

Earnings Momentum
A corporation's earnings per share that continuously increases from one period to another. The usual effect is that a stock's price will rise. A corporation has earnings momentum, for instance, when its earnings per share are 24% this year, with the previous year being 16%. Its stock should see a rise in its price.

Earnings Per Share (EPS)
Amount of a corporation's earnings that are apportioned to each outstanding share of common stock. It is calculated by dividing net income minus preferred dividends and bond interest by the number of outstanding common shares. If all common stock equivalents--such as convertible bonds, preferred stock, rights and warrants--have been exchanged into common stock, earnings per share is considered to be "fully diluted."

Earnings Price Ratio (EPR)
A corporation's earnings per share related to its current stock price. It is used to compare the attractiveness of stocks, bonds, and money market instruments--also called "earnings yield."

Earnings Report
A corporation's profit and loss statement that displays its earnings or losses for a specific time period--also called an income statement. The report provides details on revenues, expenses, and the net result.

Eastern Account
An underwriting account for a new issue of municipal securities whereby the underwriting group, as a whole, assumes financial responsibility for successful distribution of the issue--also called an "undivided account." A member's profits are contingent upon their percentage of participation in the account regardless of how much they sell. Member A, for example, has a 15% participation and sells 20% of the bonds. If the group sells only 90% of the bonds, member A is still responsible to sell unsold bonds equal to the same percentage of his original participation--that is 15%.

Mathematical computerized models used to illustrate the relationship between key economic conditions such as employment rates, interest rates, and government policies. It is then used to conduct analyses on various economic situations. An econometric model, for example, might be used to show the relationship between consumer spending and unemployment rates.

Economic Growth Rate
Annual percentage change in the gross national product (GNP). If the rate rises in two consecutive quarters, it is considered to indicate an expanding economy. If the rate drops in two consecutive quarters, it is considered to mean a recession. A "real economic growth rate" is obtained when the rate is adjusted for inflation.

Economic Indicators
Key statistics indicating the direction (expanding or contracting) of the economy. Some indicators are the unemployment rate, inflation rate and balance of trade.

Effective Date
The date on which a new security issue may begin trading in the secondary market. It is usually the 20th day following the registration statement filing with the SEC, unless the SEC issues a deficiency letter requiring the issuer to make revisions to the registration statement.

Effective Rate
Yield on a debt instrument that is calculated by using the purchase price, the coupon rate, the number of days between interest payments, and the length of time until maturity. Because these other factors are considered in determining the yield, the effective rate represents a more accurate yield than the coupon rate.

Effective Sale
A security's round lot price that determines the selling price for the next odd lot. The additional amount above (buying) or below (selling) the round lot's price is the "odd-lot differential." For example, if the last round lot price is 10, the odd-lot price would be at least 10 1/8.

Efficient Market Theory
Philosophy that it is useless to conduct market analyses as all investors' knowledge and expectations are already reflected in the market and the stock's price. Thus, it is not feasible to outperform the market. The theory also suggests that if investors randomly select stocks from a newspaper's stock listings, they would have as good a chance of outperforming the market as any professional investor.

Efficient Portfolio
Portfolio with a maximum expected return for any specific risk level, or a minimum risk level for any specific expected return.

Either/Or Order
An order that involves entry of a limit order and a stop order on the same ticket for the same security at different prices--also called an "alternative order." The order is either to buy or to sell, never both. In an either/or buy limit/buy stop order, for example, the buy limit is below the current price and the buy stop is above. The execution of the buy limit cancels the buy stop and vice versa. To illustrate, if a stock is trading at 32, an investor may place an order to either buy at 30 or 33 stop. If the price rises to 33 (or above), the stop is chosen--the security is purchased at the market and the limit is canceled. If the price falls to 30, the limit is executed and the stop is canceled. If there is a partial execution of one, the number of shares executed is automatically canceled from the other.

An either/or order is used by an investor who is uneasy about a stock's price movement and wants to protect an interest or position if the price fluctuates in an unexpected manner.

Elasticity of Demand
Consumers' receptiveness to price changes. As the price of luxury items increase, demand for items such as luxury cars and stereo systems usually decline because these goods are not essential and can be delayed. However, for inelastic items such as food and shelter, if the price rises, the need still exists and consumers will continue to make these purchases.

Elasticity of Supply
Sensitivity of production to price changes. As prices increase, production supply rises (e.g., luxury cars) because the demand for such items decreases. If the production supply does not increase, the goods are considered to be inelastic (e.g., food).

Eleven Bond Index
The average yield of eleven general obligation municipal bonds with 20 year maturities. The eleven bonds are taken from the twenty bonds within the Twenty Bond Index. The yield is computed Thursday afternoons and is published every Friday in the "Daily Bond Buyer."

Eligible Paper
Negotiable instruments such as commercial paper, drafts, and banker's acceptances that a bank obtains at a discount and in which the Federal Reserve Bank will accept for rediscount.

Employee Retirement Income Security Act (ERISA)
Federal law passed in 1974 that regulates the establishment, management, operation, and funding of most non-government pension and benefit plans.

Employee Stock Ownership Plan (ESOP)
A plan that encourages employees to purchase stock of their employer. By participating in the plan, employees are able to partake in the company's management.

The transfer of an asset's ownership by signing the back of a negotiable instrument. For instance, an individual signs the back of a stock or bond certificate to transfer ownership.

Energy Mutual Fund
Mutual fund that aims to profit from stock investments in companies whose business is energy related. For example, oil, gas, solar energy, and coal companies.

Engineering Report
An analysis and a report completed by an engineering firm as part of the feasibility study for a proposed municipal revenue issue.

Individual who starts a new business. Venture capital is often used to finance the startup costs in return for an equity share. Once the business is established, an entrepreneur may choose to raise additional capital by selling equity shares to the public through an initial public offering.

Environmental Fund
Mutual fund that aims to profit from stock investments in companies that have a role in improving the environment, or are considered environmentally sound.

EPS/T-Bill Yield Ratio
Monthly ratio of the Standard & Poor's (S & P) 500 earnings per share yield to the 3 month Treasury bill yield. It is calculated by dividing the latest 12 month earnings per share of the S&P 500 Index by the index's monthly average price for the current month. This will determine "earnings yield." Once the earnings yield is obtained, it is divided by the average 3 month T-bill yield for the same time period. If the ratio is 1.2 or greater, it is considered a good time to buy stocks. If the ratio is .9 or lower, it is considered a good time to sell stocks.

Equalizing Dividend
Dividend paid to investors to make up for lost income because the quarterly dividend payment schedule was changed.

Equilibrium Price
Price at which the supply of goods equals demand.

Equipment Leasing Partnership
Limited partnership that buys equipment such as computers and then leases it to businesses. Limited partners earn income from the lease payments. They also receive tax benefits such as depreciation. An equipment leasing partnership's profitability is dependent upon the general partner's ability to buy the right type of equipment--the type that corporations will lease.

Equipment Trust Bond
A type of bond that is commonly issued by transportation companies to pay for new equipment. Title to the equipment, such as a rail car, is held by a trustee, usually a bank, until the bond is repaid. An equipment trust certificate gives the bondholder first claim on the equipment in the event that interest and principal payments are in default.

1: Ownership interest in a business endeavor; net worth.

2: Ownership interest in a corporation through the purchase of shares of stock.

3: A customers ownership in an account at a brokerage firm. The customer's equity is the account's market value of long positions (commonly just referred to as "long market value") minus the account's debit balance, or the credit balance minus market value of short positions ("short market value").

Equity Financing
A corporation's issuance of shares of common or preferred stock to raise money. Equity financing is commonly done when its per share prices are high--the most money that can be raised for the smallest number of shares.

Equity Funding
An investment that combines a life insurance policy with a mutual fund. The fund shares are used as collateral for a loan to pay the insurance premiums. Equity funding gives the investor the insurance protection benefits along with potential investment appreciation.

Equity REIT
An investment trust in which it has ownership in the property bought within the trust. REIT is an abbreviation for "real estate investment trust." Shareholders invested in equity REITs receive dividends on a building's rental income and earn appreciation on properties sold at profit.

Equivalent Taxable Yield
Comparison between a corporate bond's taxable yield and a municipal bond's tax-free yield. Depending on the investor's tax bracket, the after-tax return may be greater with a municipal bond than with a corporate bond that has a higher interest rate. The equivalent taxable yield is equal to the municipal yield divided by 100% minus the tax bracket. For an investor who is in a 28% tax bracket, for example, a 9% municipal bond would have an equivalent taxable yield of 12.5% (9%/72%).

Erroneous Report Rule
A New York Stock Exchange rule dictating that a client must accept a valid execution, regardless of any reporting mistakes.

Abandoned property (e.g., bank account balances) that is turned over to the state. This will also occur when a person dies without a will. If the owner or heirs later appear, the property can be claimed from the state.

Money, securities or other property that is held by a third party until a contract's conditions are met.

Escrow Receipt
A certificate issued by a bank guaranteeing that the options writer has the option's underlying securities on deposit at the bank and that they will be delivered to the broker if the option is exercised.

Estate Tax
Tax imposed by a state or the federal government on assets left to heirs in a will. There currently (as of February 1995) is not an estate tax on property transfers between spouses and assets up to $600,000 are excluded.

Estate Tax Anticipation Bonds
Specified US Treasury bond issues that are accepted at par value for estate tax payments if the bonds were owned by the decedent at the time of death. Also called "flower bonds," the last of these bond issues will mature in 1998.

Estimated Tax
The anticipated amount of tax for the coming tax year that is based on the higher of regular or alternative minimum tax (AMT) minus any tax credits. Persons or entities, for whom an employer does not withhold a fixed percentage of income, need to calculate estimated tax and make quarterly payments. Total withholdings and estimated taxes paid must equal the prior year's actual tax or 90% of the estimated year's tax.

Bond that is denominated in a specific country's currency and sold to investors outside the country whose currency is used. The bonds are usually issued by large underwriting groups from many countries. The entity issuing the bonds does not have to be from the country whose currency is being used. Eurobonds provide an important capital source for multinational companies and foreign governments.

Money--also called "Euromoney"--deposited by corporations and governments in banks not located in their home countries. These banks are called "Eurobanks." The currencies or the banks are not necessarily European. For example, dollars deposited in a Japanese bank are considered to be Eurocurrency.

US currency held in banks outside the US, primarily in Europe.

Eurodollar Bond
Bond paying interest and principal in Eurodollars--US dollars held in banks outside the US. Eurodollar bonds do not have to register with the Securities and Exchange Commission.

European Style Exercise
A stipulation that only allows holders to exercise some US listed and almost all European options on the last day (or the day before) they expire.

An independent expert who assesses a property's value for which there is limited trading--such as antiques or rarely traded stocks. For the evaluator's services, either a flat fee may be charged or a percentage of the item's appraised value.

Event Risk
In the case of an associated takeover development, such as additional debt issuance, risk that a bond's credit quality will decline and a lower rating will be justified. Corporate bonds that include protective covenants, such as poison puts, are given event risk covenant rankings by Standard & Poor's. Ratings range from E-1 (highest) to E-5 (lowest). Covenant rankings are supplemental to basic bond ratings.

Exact Interest
A financial institution's interest payments in which the interest is calculated on a 365 day basis as opposed to a 360 day basis. The difference--the ratio is 1.0139--is substantial when calculating daily interest on large amounts of money.

A purchase of a stock while it is trading without dividends, rights, warrants, or any other privileges connected with that stock.

Excess Margin
Equity in a customer's margin account at a brokerage firm that is above the Regulation T minimum or the New York Stock Exchange maintenance requirement. With a Regulation T margin requirement of $50,000 and an exchange maintenance requirement of $25,000, for example, the customer whose equity is $100,000 would have excess margin of 50,000 and 75,000, respectively.

Excess Profits Tax
Additional federal taxes levied on business earnings. The purpose of the tax is to increase national revenues during a time of national emergencies.

Exchange Distribution
Block trade completed on an exchange floor. An investor who wishes to sell a large block of stock in one transaction will request a broker to solicit and group orders. The seller sells the securities to the buyers all at the same time, and the trade is announced on the broad tape as an exchange distribution. The seller pays a special commission to the executing broker.

Exchange for Physical Program (EFP)
A trading technique involving index futures and the stocks composing the index. Complex computer programs show deviations in the spread between the futures and the stocks. The trader attempts to profit through arbitrage--buying the index future and selling the stocks short, or vice versa. As the spread returns to its norm, the positions are closed out at a profit.

Exchange Privilege
A mutual fund feature that allows a shareholder to convert from one fund to another fund within the same mutual fund family. For example, in a bull market an investor placed their money in an aggressive growth fund. If they expected the market to take a downturn, an exchange privilege would allow them to move the money to a conservative fund such as a money market. Mutual funds do not usually charge when an investor takes advantage of an exchange privilege. However, some funds do have specific parameters as to when or how many times an investor may use the exchange privileges.

Exchange Rate
Price at which the currency of a particular country can be converted into another country's currency. Exchange rates usually vary slightly each day and are influenced by a wide range of economic factors.

A synonym for "without dividend," it is the time period between a dividend announcement and payment during which an investor who buys the stock's shares is not entitled to receive the dividend. For example, a dividend may be declared as payable to holders of record on the company's books on a given Friday (the record date). The New York Stock Exchange would declare the stock "ex-dividend" as of the opening of the market on the preceding Wednesday (two business days prior to the record date). Therefore, an investor who buys the stock on or after that Wednesday is not be entitled to that dividend.

It is common for a stock's price to increase by the dividend amount as the ex-dividend date gets closer. It then usually drops by the dividend amount after the ex-dividend date. A stock that is ex-dividend is marked with an "x" in the stock table listings in newspapers.

Securities term to used to indicate that a buy or sell order has been completed.

Any individual(s) appointed in a will, and confirmed by the court to administrate and distribute assets within the decedent's estate.

Exempt Accounts
NYSE term used to describe a customer who is not subject to exchange margin rules for US government issues and mortgage-backed securities. The customers may be individuals who have at least $16 million net tangible assets, broker-dealers and entities that are regulated by the US government or any of its agencies, states or municipalities.

Exempt Securities
Securities that are not subject to the registration requirements of the Securities Act of 1933. Exempt securities also include securities that do not have to follow certain provisions of the Securities Exchange Act of 1934 in terms of margin, registration of dealers who make a market in them, and certain reporting requirements. Examples of exempt securities are municipal bonds, governments and bank securities.

Exempt Transaction
A security transaction that is excluded from registration requirements.

In options trading, the holder of a long contract has the right to buy (call option) or sell (put option) the underlying shares at the exercise price by notifying the option seller (writer). In making notification to the seller, the holder is exercising the option contract.

Exercise Limit
Maximum number of option contracts of the same class that can be exercised within five consecutive business days. Stock options usually have an exercise limit of 2000 contracts.

Exercise Notice
Notification by a broker that a client who holds a long option wants to exercise a right to buy (if call) or sell (if put) the underlying stock in an option contract. The notice is sent to the Options Clearing Corporation (OCC) which in return notifies the option seller (writer) to make sure that the stock is delivered.

Exercise Price
Dollar value per share at which the underlying security in a long option contract can be exercised over the specified period. If it is a call option, when exercising, the underlying security is bought, and if it is a put option, it is sold. The holder of 1 ABC January 65 put, for example, can exercise the contract before January's expiration date. Thus, when exercising the contract, the holder sells 100 shares of ABC at the exercise or strike price of $65.

Exit Fee
Mutual fund lingo used when a penalty (in cents per share) is charged to investors who redeem their investment within the fund's first few years of operation. Not to be confused with a back-end load.

In accounting, a disbursement against revenue in the period incurred. The expenditure reduces income.

Expense Ratio
Charge, stated as a percentage of total investment, that shareholders pay for a mutual fund's operating expenses, management fees and other overhead expenses. The money is withheld from the fund's current income and is not an out-of-pocket cost to the investor. It is normally disclosed in the fund's annual report to shareholders.

Situation in which a municipal bond does not have a legal opinion printed on it. Buyers of these bonds must be forewarned that there is not a legal opinion.

The last day on which an option can be exercised. If it is not, the option is said to have "expired worthless."

Expiration Cycle
Cycles used to designate expiration dates in options trading. Corporations and indexes that have options trading are assigned a specific cycle to follow. There are three cycles: 1: January, April, July, October; 2: February, May, August, November; 3: March June September, December. Only three of the four months in a set are traded at one time. For example, when February options expire, trading in November options will begin.

Expiration Date
The date on which an option expires. In most cases, an options expiration date is on the Saturday immediately following the third Friday of the expiration month. However, the last day the option can be traded is the third Friday of the expiration month.

Export-Import Bank (EXIM)
A bank that facilitates US trade with foreign countries by providing financing for exports and imports. It borrows money from the US Treasury and is backed by the full faith and credit of the US Government.

Brokerage lingo meaning "without rights." During a rights offering, if the common stock is purchased on or after the ex-rights date (four business days prior to the record date), the investor does not receive rights that enable an investor to buy the company's common stock at a discount from the prevailing market price. As a rule, after the ex-rights date, the rights will trade separately from the common stock.

External Funds
Outside funds infused into a corporation to supplement the firm's cash flow. They are used for expansion and working capital needs. The external funds can originate from a bank loan, a bond offering, or from venture capitalists.

Extra Dividend
A stock or cash dividend paid to shareholders. It is in addition to the company's regular dividend. An extra dividend may be paid by a company after an especially profitable year to reward its shareholders.

Extraordinary Item
An irregular event, such as a division write-off or acquisition of another company, that needs to be explained to shareholders in an annual or quarterly report. Earnings will normally be calculated and reported before the effect and after the effect of extraordinary items.

Brokerage lingo meaning "without warrants." An investor who buys a stock that is ex-warrants are not entitled to the stock's warrants. An investor, for example, who buys a stock on April 25 that has gone ex-warrants on April 23, will not be entitled to receive those warrants. The warrants belong to the shareholder of record on April 23. Warrants permit the holder to buy stock at a specified price at a future date.