The role of this glossary is to present brief definitions of most of the key concepts in economics and finance (in total 1064 names-definitions) as well as security markets (financial, capital, money) with aim the reader to be able to understand and become familiar with the terminology in the analyses that will present in the category economics.
Additionally, we hope that the reader by acquiring intimacy with the economic terminology, he will also love the science/art of economics, giving to it a significant part of his personal time.
In the following glossary we tried to include the most well-known definitions and terms in the field of Economics & Finance. If you still find that a term or definition is missing and you know that it can be included in this glossary, please do not hesitate to contact us via the contact form of our web-site (Contact Us) and the Liberal Globe will edit it and will include it.
Glossary Economics & Finance
There are currently 87 names in this directory beginning with the letter P.
Par or central value
is named the fixed official exchange rate declared by the monetary authority of a country.
Par value of common stock
is called the nominal value of shares of common stock which are legally carried on the books of a corporation.
Parallel currencies
are those currencies which are issued by private institutions or foreign countries and are used alongside domestic money.
Parametric
is named the condition that arises when a functional form for the distribution of a set of data points is assumed i.e. when the normal distribution is used to characterize a set of returns.
Paris club
is the name of a group of primary sovereign lenders, which jointly hold close to 50's of all sovereign debts and negotiate debt rescheduling and debt relief efforts.
Partial autocorrelation function
is called that term which is used in the identification stage of time-series (box-Jenkins) analysis.
Partial correlation coefficient
is named that term which measures the linear association between two variables when specified other variables are held constant. It is estimated as the correlation coefficient between the residuals obtained when the two variables in question are regressed on the variables to be held constant.
Partial crowding out
is called the situation in which an increase in government spending leads to a decline in private spending that does not completely offset the rise in government spending.
Partial market equilibrium conditions
are called the equality between the demand and supply in a market under consideration.
Participation certificate
is called a bond which represents an ownership interest in a pool of fixed-income securities. The holders of the certificates receive the interest and principal payments on the pooled securities in proportion to their ownership of the pool.
Partisan business cycles
are called those business cycles which arise as the result of the successions in power of parties which have different economic priorities and preferred policies.
Passive investment system (passive management)
is called the process of buying and holding a well-diversified portfolio.
Payout ratio
is called the percentage of a firm's earnings paid to shareholders in the form of cash dividends.
Pegging
is called the process by which investment bankers attempt to stabilize the price of an underwritten security in the secondary market for a period after the initial offering date.
Percentage depletion method
is named that method which is used in order to deplete natural resources for corporate income tax purposes with aim to allow a stated percentage of the gross income from the property (before any costs) to be deducted as an expense during a given time period.
Perfect markets
are called that security markets in which no impediments to investing exist. These impediments include things like a finite divisibility of securities, taxes, transactions costs and costly information.
Performance attribution
is named the way to identify the sources of returns for a portfolio or security over an evaluation period.
Permanent income
is named that income in which the flow of income and given that it is constant, would deliver the same present value as the actual expected income path.
Personal disposable income
is called the total household income minus income taxes and fines and fees, which can be used next for consumption or savings.
Personal income
is named the total household income which arise from all sources before income taxes.
Phillips curve
in the graphic context, is an empirical negatively relationship which links the inflation rate to the unemployment rate.
Pink sheets
are called all the written published quotations on over-the-counter stocks that are not listed on NASDAQ.
Planned investment spending
is named the total planned spending by business firms on new physical capital (i.e. machines, information technology appliances, buildings etc.) plus the total planned spending on new residential houses.
Poison pill defence
is called a strategy which is used by corporations in order to ward off hostile takeovers. The implemented strategy states that the targeted company gives its shareholders certain rights that can be exercised only in the event of a hostile takeover, and that, once exercised, will be extremely onerous to the acquirer.
Policy ineffectiveness proposition
is named the new classical inference that the anticipated policy has no effect on output fluctuations.
Policy lags
are named the delays (recognition, decision, implementation and effectiveness) which occur between a situation calling for policy action and the ultimate effect of that action; may exacerbate rather than smooth economic fluctuations.
Political business cycles
are called the business cycles which arise due to the implementation of macroeconomic policies which have aim to improve the state of the economy just before the elections.
Political risk
is named the uncertainty in return on a foreign financial asset due to the possibility that the foreign government might take actions that are detrimental to the investor's financial interests.
Portfolio construction (security selection)
is called that part of the investment process which involves the recognition of which assets to invest in as well as the shaping of the proportion of funds to invest in each of the assets.
Portfolio insurance
is named an investment portfolio strategy which has been designed to guarantee a minimum rate of return and at the same time allows to the investor to benefit substantially from the generated positive returns which arise from an investment in a risky portfolio.
Portfolio manager
is called an individual who utilizes the information that is provided by financial analysts with aim to construct a portfolio of financial assets.
Portfolio performance evalutaion
is called the investment process in which is involved a periodic analysis of how a portfolio performed in terms of both returns earned and risk incurred.
Portfolio revision
is called the part of the investment procedure which involves a periodic repeated process about the resetting or not of the investment policy, a security analysis and the reconstruction or not of the portfolio.
Portfolio turnover
is called the measurement index which shows of how much buying and selling occurs in a portfolio over a given period.
Position (long or short) (i.e. foreign exchange market)
is called the trading position that a trader takes. Long position means that a trader owns a given currency or has contracted to receive that currency in the future. Short position means that a trader does not own a given currency or he has contracted to make payments in that currency in the future.
Positive economics
are called that branch of economics which states the description and explanation of economic phenomena. Dealing of "what is".
Preemptive rights
are called the rights which have the existing shareholders in order to purchase the new shares in proportion to the number of shares that they currently own and always when their corporation plans an issuance of new common shares.
Preferred habitat theory
is named that theory which states that the interest rate on a long-term bond will be equal with an average of short-term interest rates which are expected to occur over the maturity of the long-term bond, plus a risk premium which arise due to the supply and demand conditions which will existed for that bond.
Preferred stock
is named a hybrid form of security that has characteristics of both common stocks and bonds.
Present value or present discounted value
Today's value of a payment to be received in the future when the interest rate is (i).
Price impact
is called the impact on the price of a security as a result from a trade in that security. Price impact is the result of several factors like size of the trade, demand for immediate liquidity, and presumed information of the individual or organization placing the order.
Price relative
is called the ratio which arise from the price of a security in one period divided by the price of that same security in a previous period.
Price weighted market index
is named that market index in which the influence of a security to the value of the index is a function of the security's current market price.
Price-Earnings (P/E) ratio
is named a corporation's index which is expressed by the current stock price dividend by its earnings per share.
Primary current account
is called the current account less net interest payments (net investment income). In other words, it is the difference between gross domestic product output and aggregate domestic spending when unilateral transfers are equal to zero.
Primary current account functions
describe the positive relationship between the primary current account and the real exchange rate as well as the negative relationship between the primary current account to the level of GDP or income.
Primary government budget surplus
is called the excess of government tax revenues over noninterest expenditures, or the excess of net taxes plus interest payments over government purchases of goods and services.
Primary market
is named the financial market in which new issues of a security are sold to initial buyers.
Principal of bond (face value or per value of bond)
is called the nominal value of a bond which is repaid to bondholders at the maturity date.
Principal-agent problem
is named a type of moral hazard problem that occurs when the manager in control (the agent) acts in his own interest instead in the interest of the owners (the principals) because his incentives differ from theirs.
Principle of diminishing returns
is called the proposition which states that additional investments in a particular asset produce increasingly smaller additional returns.
Printing money
is called a method of financing government spending through the creation of high-powered money.
Private placement
is named the direct sale of a newly issued security to one or a small number of large institutional investors.
Privatization
is called the sale or transfer of part or all state-owned enterprises to the private sector.
Probabilistic forecasting
is named a type of security analysis which starts with a series of economic scenarios, along with their respective probabilities of occurrence. Each of these scenarios is escorting with projections about the prospects for various industries, companies and stock prices.
Probability distribution
is named a model which describes the relative frequency of possible values that a random variable can assume.
Procyclical
refers to variables that have positive relation with the state of the economy (i.e. fluctuations of GDP around trend).
Producer surplus
is named the difference which exist between the price that a producer receives for a given quantity of goods and the amount corresponding to the minimum price at which he would be willing to supply the same quantity.
Production function
is called the theoretical relationship that links aggregate output to inputs of factors of production.
Production possibility frontiers
in graphic terms is the curve that defines how the production of goods of one sort is transformed into goods of the other sort given total resources, technologies and market institutions.
Productivity growth slowdown
is called the condition of downturn of total factor productivity growth observed since the mid-1970s despite the developments of new technologies.
Professional money manager
is called an individual or organization that invests funds on behalf of others.
Program trading
is called the purchase or sale of a collection of securities as if the collection were one security. Program trades are prominently employed in portfolio insurance and index arbitrage strategies.
Promised yield-to-maturity
is named the yield-to-maturity on a bond which is estimated if all promised cash flows are received on a full and timely basis.
Prospectus
is named the official selling circular that must be given to the purchasers of new securities registered with the SEC. The prospectus provides various information about the issuer's business, its financial condition, and the nature of the sensitivity being offered.
Proxy
is called the signing by a shareholder of a power of attorney which means to permit a designated party to cast all the shareholder's votes on any matter brought up at the corporation's annual meeting.
Proxy fight
is named an attempt by dissident shareholders to solicit proxies to vote against corporate incumbents.
Pseudo-American model
is called a model which is used to value options on stocks that pay dividends over the life of the option. The values of the option are determined by assuming the option is either exercised early (just before each ex-dividend date for calls; just after each ex-dividend date for puts) or at expiration. The highest value obtained is the value of the option.
Public goods
are named those goods and services that are provided free of charge and the consumption of which by one person does not prevent the consumption by another person (characterized by non-excludability and non-rivalry).
Purchase group (syndicate)
is named a group of investment banking organizations that, as part of a security underwriting, are responsible for purchasing the security from the issuer and reselling it to the public.
Purchasing Power Parity (PPP)
is called that principle which asserts that the rate of nominal exchange rate depreciation is equal to the difference between the domestic and foreign inflation rates. A stronger (and less plausible) absolute form of PPP equalizes the price levels across countries when expressed in a common currency.
Purchasing power risk
is called that risk which the investors experience in financial assets because of the uncertainty about the impact of inflation on the real returns which are formed by those financial assets.
Pure discount security
is named a fixed income security that promises to make only one payment to its owner (usually at maturity).
Pure factor plays
are called that portfolio which possesses a unit sensitivity to one factor, no sensitivity to any other factor, and has zero nonfactor risk.
Pure flexible exchange rate regime (or clean float)
is named an exchange rate system that has no central bank intervention in the foreign exchange market.
Pure yield pickup swap
is a type of bond swap where an investor exchanges one bond for another to obtain a higher yield over the long-term, with little attention paid to the near-term outlook for the bonds' respective market segments or the market.
