GLOSSARY OF STOCK MARKET TERMS

Bear – an investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.

Blue Chip – A large well-established company with a history of profitable operation.

Bonds – Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.

Bull – An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price.

Capital Gains Tax – Tax payable on profit arising from appreciation in value of investment, realized at the time of selling or maturity of investment.

Carry-over Trades–Equity repurchase transactions, better known, as “Badla”; these are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Dividend – That part of a company’s profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital.

Earnings per share (EPS) – A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period.

Equity – The owners’ interest in a company’s capital, usually referred to by ordinary shares.

Floatation – The occasion when a company’s shares are offered on the stock market for the first time.

Fund managers – A company, which invests and manages investors’ money, with the aim of maximizing capital growth.

Initial Public Offering (IPO) – The offering of equity shares of a company to the general public for the first time.

Insider trading – The purchase or sale of shares by someone who possesses ‘inside’ information on a company’s performance which information has not been made available to the market and which might affect the share price. In Pakistan, such deals are a criminal offence.

Investment companies – A company, which issues shares and uses its capital to buy securities and shares in other companies.

Listed company – A company whose securities are admitted for listing on a stock exchange.

Long position - When an individual purchases securities of a company he is said to have a long position in the company’s shares. For example an owner of shares in PTCL is said to be "long PTCL" or "has a long position in PTCL." If you are long, you would like the share price to go up.
Market capitalization – The total value of a company’s equity capital at the current market price.

Nominee – A person or company holding securities on behalf of others, but who is not the owner of such securities.

Option – The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.
Ordinary shares – The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

Portfolio – A collection of investments
Price/earning ratio (P/E ratio) – The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors has in a company. It is calculated by dividing the current share price by the last published earnings per share.

Primary market – Where a company issues new shares, either for the first time, or at the time of issuing additional securities.

Privatization – Conversion of a state-owned company to a public limited company (plc) status.
Public limited company (plc) – A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum.

Rights Issue – The issue of additional shares to existing shareholders when companies want to raise more capital.

Securities – A broad term for shares, corporate bonds or any other form of paper investment in capital market instruments.

Settlement – Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short Selling- The act of borrowing stock to sell with the expectation of price reduction with the intention of buying it back at a cheaper price.
Stockbroker – A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Stock Market – The market place where shares of publicly listed companies are bought and sold.

Unit trust – An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield – The aggregate return earned on an investment taking into account the dividend/interest income and its present capital value.