Finance Lecture on Stocks and Investments

These flashcards cover key terms and concepts discussed in the lecture on stocks and investments, including definitions of financial terms and strategies relevant to portfolio management.

Shares

Units of ownership in a company representing a claim on a part of the company's assets and earnings.

Diversification

The practice of spreading investments across various financial instruments, industries, and other categories to reduce risk.

Portfolio

A collection of financial assets such as stocks, bonds, commodities, and cash equivalents, held by an investor.

Risk-free asset

An asset that is assumed to have no risk of financial loss, often represented by government treasury bonds.

Stock split

A corporate action that increases the number of shares outstanding by dividing existing shares into multiple shares.

Cyclical stock

Stocks that are correlated with the economic cycles, performing well during economic growth and poorly during recessions.

Defensive stock

Stocks that provide stable earnings and are less sensitive to economic cycles, often found in essential services.

Frontier stock

Stocks from developing countries that are not yet in the emerging market category, still experiencing economic instability.

ADR (American Depository Receipt)

A negotiable certificate issued by a U.S. bank representing a specific number of shares in a foreign company's stock, traded on U.S. exchanges.

Rights offering

A way for companies to raise capital by giving existing shareholders the right to purchase additional shares at a discounted price.

Reverse split

A reduction in the number of a company’s outstanding shares, resulting in an increase in the share price, commonly associated with struggling companies.

Beta

A measure of a stock's volatility in relation to the overall market, indicating how much the stock price might move compared to market movements.

Dividend

A portion of a company’s earnings distributed to shareholders, usually in cash or additional stock, decided by the board of directors.

Stock buyback

A corporate action in which a company repurchases its own shares from the marketplace to reduce the number of outstanding shares.

Penny stocks

Stocks that trade at a very low price, typically under $5, and are often subject to high volatility and trading volume.

Market capitalisation

The total market value of a company's outstanding shares, calculated by multiplying the share price by the total number of shares.

Volatility

The degree of variation in the price of a financial asset over time, indicating the level of risk associated with the asset.

Correlation

A statistical measure that describes the extent to which two variables fluctuate together, important for portfolio diversification.

Overvalued stock

A stock whose price is higher than its intrinsic value, often assessed through various valuation methods.