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 80 names in this directory beginning with the letter R.
R2
in the framework of a simple linear regression it is the proportion of the variation in the dependent variable that is related to variation in (that is "explained by" the independent variable).
Ramsey principle of public finance
is that principle which states that for a given amount of revenue to be raised, goods with the most inelastic demands and supplies should be taxed most heavily in order to minimize overall loss of consumer and producer surplus in an economy.
Random error term
in the context on some predicted model is named the difference between the actual value of a random variable and the predicted value.
Random walk
is called the movements of a variable whose future changes cannot be predicted (are random) because, given today's value, the variable has the same chances to fall as to rise.
Rate anticipation swap
is named a form of bond swap where an investor exchanges bonds that are expected to perform relatively poorly for those that are expected to perform relatively well, given a predicted movement in interest rates.
Rate of capacity utilization
is named a corporate measure index which shows cyclical conditions. In other words, it measures the degree to which firms employ their plants and equipment.
Rate of capital gains
is named the change in a security's price relative to the initial purchase price.
Rate of return
is called the percentage change in the value of an investment in a security (or portfolio of securities) over a period.
Rational expectations hypothesis
is named that hypothesis which asserts that agents evaluate future events using all available information efficiently so that they do not make systematic forecasting errors.
Real bills doctrine
is named a guiding principle (now discredited) for the conduct of monetary policy that states that if loans are made to support the production of goods and services, providing reserves to the banking system to make these loans will not be inflationary.
Real business cycle theory
is called that theory which states that assess real shocks to tastes and technology as the major driving force behind short-run business cycle fluctuations.
Real consumption wages
are called the ratio of nominal wages to the consumer price index; In other words, it is a measure of the price of leisure (or the return to work) in terms of consumption goods and services, and the incomes associated with productive activities.
Real economy
concerns the production and consumption of goods and services, and the incomes associated with productive activities.
Real Estate Investment Trust (REIT)
is an investment fund which likes an investment company, whose investment objective is to hold mainly real estate-related assets, either through mortgages, construction and development loans or equity interests.
Real exchange rate
is named the index which describes the cost of foreign goods in terms of domestic goods and is defined as the nominal exchange rate which is adjusted by prices at home and abroad.
Real interest rates
are named the difference between the nominal interest rate and the expected rate of inflation.
Real investment
is called that investment which involves tangible asset like land, equipment, buildings etc.
Real return
is defined the percentage change in the value of an investment in a security, where the opening and finale values of the security are adjusted for inflation over the time of the investment.
Realized capital gains or loss
is named a capital gain (loss) on an asset that is recognized, for tax purposes, through the sale or exchange of the asset.
Recardian equivalence
is named that hypothesis which states that the time profile of taxes which are needed to finance a given stream of government purchases has no effect on agents' intertemporal budget constraint as well as on real spending and saving decisions; then the public debt is not considered as private wealth.
Red Herring
is called a preliminary prospectus that provides much of the information in the final prospectus, but is not an offer to sell the security, nor does it exhibit an actual offering price.
Redemption fee (exit fee)
is named a fee levied by an investment company when an investor sells shares back to the investment company.
Reduced form evidence
is called the evidence that examines if one variable influence another by simply looking directly at the relationship between the two variables.
Regional brokerage firm
is called an organization that suggests brokerage services which it is specialized in trading the securities of companies that are in a region of the country.
Regional exchange
is called an organized exchange which specializes in trading the securities of companies located in a region of the country.
Registered bond
is named a bond for which the bondholder is registered with the issuer and receives coupon payments directly from the issuer but in order to change the ownership he requires notification from the issuer.
Registrar
is called a designed agent of a corporation responsible for cancelling and issuing shares of stock in the corporation as these shares are issued or traded.
Registration statement
is named that document which is deposited in the Securities and Exchange Commission prior to initiating a public security offering.
Regulation Q
is called the regulation under which the FED has the power to set maximum interest rates that banks can pay on savings and time deposits.
Regulatory forbearance
is called a refraining by regulators from engaging in their right to put an insolvent bank out of business.
Reinvestment rate risk
is called the uncertainty which appears in the return on a fixed-income asset which are caused by unanticipated changes in the interest rate at which cash flows from the asset can be reinvested.
Relative price
is named the price of one good in terms of another, usually calculated as the ratio of two nominal prices.
Replacement cost accounting
is named the use of estimated replacement costs instead of historical book-value costs when calculating corporate earnings.
Repurchase agreement (repo)
is named that arrangement in which the FED purchases securities with an agreement that the seller will repurchase them in a short period of time, usually less than a week.
Repurchase offer
is named an offer by the management of a corporation to buy back some of its own stock.
Reputation
is named the effect on the public of self-imposed rules by the government to refrain from some actions even if at some point such actions are highly desirable.
Required reserves
are named those reserves that are held because the Central Bank requires that for every unit of domestic currency of deposits at a bank it must be kept a certain fraction as reserves.
Required reserves ratio
is named the fraction of deposits that the Central Bank requires to be kept as reserves.
Reschedulling
is called the extension of loans without to alter the present discounted value of planned debt repayments.
Reserve currency
is named a currency that is used by other countries to denominate the assets they hold as international reserves.
Reserves
are called the holding of bank deposits in accounts at the Central Bank, plus the currency that is physically held by banks (vault cash).
Reserves ratio
is named the ratio of a commercial bank's reserves (vault cash or deposits at the central bank) to the total demand deposits it has issued.
Restricted account
is called a margin account in which the actual margin has fallen below the initial margin requirement but remains above the maintenance margin requirement.
Restricted stock
is named a stock which is unregistered and sold directly to the purchaser, rather than through a public offering. This type of stock must be held at least two years and cannot be sold even at that time unless ample information on the company is available and the amount sold is a relatively small percentage of the total shares outstanding.
Restrictive covenants
are called the provisions which restrict and specify certain activities that the borrower can engage in.
Restructuring
is called the assembly of the term structure of debt repayments or the terms of the debt.
Retention ratio
is named the percentage of the firm's earnings that are not paid to shareholders, but instead are retained by the firm. It is estimated by (1-payout ratio).
Return generating process
is a statistical model which describes how the returns on a security are produced.
Return to equity
is named the earnings per share of a firm divided by the firm's book value per share.
Returns to scale
is called the impact on output of an increase in all inputs by the same proportion. If output increases equally, the production function is said to exhibit constant returns to scale; if output increases more or less than proportionally, we have respectively increasing or decreasing returns to scale.
Revaluation
is named the decision which is taken by the monetary authority to increase the value of the currency.
Reverse bond
is named that municipal bond which is backed solely by the revenues from a designated project , authority, or agency or by the proceeds from a specific tax.
Reverse causation
describes a condition in which one variable is said to cause another variable when the reverse is true.
Reverse repo agreement
is named a transaction in which the central bank sells securities and the buyer agrees to sell them back to the central bank soon.
Reverse stock split
is a type of stock split whereby the number of shares is reduced and the par value per share is increased.
Reverse trade
is named the purchase or sale of a futures (or options) contract designed to offset, and thereby cancel, the previous sale or purchase of the same contract.
Reward to Variability ratio
is an ex post risk-adjusted measure of portfolio performance where risk is defined as the standard deviation of the portfolio's returns. Over an evaluation period it is the excess return of a portfolio which is divided by the beta of the portfolio.
Right
is named a choice which is delivered to existing stockholders that permits them to buy a specified number of new stocks at a designated subscription price. For each stockholder, this number is proportional to the number of existing stocks currently owned by the stockholder.
Rights offering
is named the sale of new shares directed by first offering the share to existing stockholders in proportion to the number of stocks owned by each stockholder.
Risk
is the quantitative uncertainty which is associated with the end-of-period value of an investment in an asset or portfolio of assets.
Risk adjusted return
s called the return on an asset or portfolio, which is modified in order to refer the risk to which the asset or portfolio is exposed.
Risk based premiums
usually is an insurance premium that is charged based on how much risk a policy holder poses for the insurance company.
Risk function
is called the expected value of a loss function in Bayesian estimation; in classical analysis, it is usually interpreted as the sum of the MSEs of the parameter estimates.
Risk grade
in the context of a single security or portfolio is named a ranking which measures the potential volatility of the security or portfolio relative to the volatility of a standard benchmark. The benchmark which is used to be used is the average daily volatility of the market-capitalization weighted average of international equity indices and is defined to have a Risk Grade of 100. i.e. if a position or portfolio has a Risk Grade of 300, the position or portfolio is three times as volatile as the benchmark.
Risk impact
in the context of a single security is the percentage amount that the portfolio's Risk Grade will decrease upon removal of that security.
Risk premium
is named that compensation which is above and beyond the expected rate of return on an asset and it is required by agents to hold it.
Risk seeking
is named the behavior which is characterized by choosing an investment with more risk relative an investment with less risk given that both investments provide the same expected return.
Risk structure of interest rates
is named the relationship which hold between the various interest rates on bonds with the same term to maturity.
Risk-free asset
is named an asset whose return over a given holding period is certain and known at the beginning of the holding period.
Risk-free borrowing
is known as the act of borrowing funds that are to be paid back with a known rate of interest.
