Glossary of Terms
Regularly, financial reports are littered with abbreviations that often make little sense to those outside the financial industry so here is a listing of some of those that are more commonly seen.
|ASX||Australian Stock Exchange|
|Bernanke||Ben S. Bernanke, Chairman of the US Federal Reserve|
|b.p||Basis points. 100 basis points = 1.00%|
|BOJ||Central Bank of Japan|
|BOP||Balance of payments. Value of imports vs exports|
|CAD||Current Account Deficit. Part of the BOP. The current account balance is simply the difference between receipts from the rest of the world and payments to the rest of the world.|
|Coupon||Cash distributed, more often quarterly or six monthly from a fixed interest security.|
|Dow||Dow Jones Index, (DJI) top 30 listed companies (by market capitalisation) in US. Started by Charles Dow on 26th May 1896 with 12 companies. General Electric is the only survivor of those 12.|
|Duration||Duration is a measure of risk in a bond (fixed interest security) portfolio. It is the weighted average maturity of the cashflows of a bond(s) (including the interest coupons and the face value) measured in years. The higher the duration the more the capital returns of the bond portfolio are affected by changes in interest rates.|
|ECB||European Central Bank|
|EPS||Earnings per share|
|Fed||The US Federal Reserve. The central bank of the US|
|FTSE||Financial Times Share Index, top 100 listed companies (by market capitalisation) in UK|
|GDP||Gross Domestic Product|
|Greenspan||Alan Greenspan, Ex Chairman of the US Federal Reserve|
|IMF||International Monetary Fund|
|MPS||Monetary Policy Statement|
|NZSX||New Zealand Stock Exchange|
Official Cash Rate – interest rate for call funds. Set by the RBNZ and used as a lever to influence overall monetary conditions and maintain price stability. Reviewed six weekly.
|P/E||Ratio of a share price divided by EPS to measure years to repay that purchase price. A high P/E generally relates to newer growth type companies.|
|Rally||(Bonds) Interest rates decline. Inverse relationship with bond prices. That is, price of bonds increase.|
|RBNZ||Reserve Bank of New Zealand|
|S & P||
Standard & Poor’s. International Credit rating agency.
|S & P 500||Standard & Poor’s Top 500 Index. Index for measuring the performance of largest 500 US companies in leading markets.|
|Spreads||(Bonds) A premium of a bond above the yield of a government bond – compensation for risk.|
|TMT||Technology, media, telecommunications|
|TWI||Weighted exchange rate index. A weighted index of NZ’s major trading partners.|
|Yield Curve||The relationship of the yield on a bond and its maturity date. Government bonds on issue are graphed to produce a yield curve. A measure of market expectations of interest rate, risk and return over a range of durations.|
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