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 104 names in this directory beginning with the letter S.
Sampling error
is called the error in estimating a parameter caused by the fact that in the sample at hand all the disturbances are not zero.
Scalper
is named a member of an organization futures exchange who trades for his or her own account and has a very short holding period.
Seat
is named a member of an organized exchange which holds a seat in the exchange and has the privilege of being able to execute trades using the facilities provided by the exchange.
Secondary distribution
is named a means of selling a block of stock where the stocks are sold away from an organized exchange after the close of trading in a manner like the sale of new issues of common stock.
Secondary security market
is named any market in which securities are trade without regard to the previous or original owners.
Securities
are claims on the borrower's future income or assets that are sold by the borrower to the lender.
Securities and Exchange Commission (SEC)
is named a federal agency established by the Securities Exchange Act of 1934 that regulates the issuance of securities in the primary market and the trading of securities in the secondary market.
Securities Investor Protection Corporation (SIPC)
is named a quasi-governmental agency that insures the accounts of brokers against loss due to the brokerage firm's failure.
Securitization
is named the process of transforming illiquid financial assets into marketable capital market instruments.
Security
is named the legal representation which gives the right to receive prospective future benefits under stated conditions.
Security analysis
is named an element of the investment process that involves the determination of the prospective future benefits of a security and the conditions under which such benefits will be received as well as the likelihood of such conditions occurring.
Security Market Line (SML)
is called the line which is derived from the capital asset pricing model (CAPM) and describes the relationship between an asset's beta and its expected return.
Security selection (portfolio construction)
is called the component of the investment process that involves the identification of which assets to invest in as well as the determination of the proportion of funds to invest in each of the assets.
Segmented markets theory
is named the theory of term structure that sees markets for different maturity bonds as completely separated and segmented, so that the interest rate for each maturity bond to be determined solely by the forces of supply and demand equally for that maturity bond.
Seignorage
is named the exploitation from the government of the monopolistic power of the central bank in order to create money as a means of raising real resources.
Selectivity
is named a characteristic of security analysis which entails the prediction of the price movements of individual securities.
Self-correcting mechanism
is named a characteristic of the economy that causes output to return eventually to the natural rate level regardless of where it was initially.
Self-regulation
is named a technique of governmental guideline where the rules and standards of behavior in security markets are established by firms that activate in these markets, subject to the oversight of various federal agencies such as the SEC and CFTC.
Selling group
is named a group of investment banking organizations who, as part of a security underwriting are responsible for selling the security.
Semi-strong form market efficiency
is named a version of market efficiency in which all relevant publicly available information is fully and immediately reflected in security prices.
Separation theorem
is named a characteristic of the capital asset pricing model which states that the optimal combination of risky assets for an investor can be determining without any knowledge about the investor's preferences towards risk and return.
Serial bond
is named a bond issue which has different portions of the issue that matures at different dates.
Settle price
is named the representative price for a futures contract which is determined during the closing period of the futures exchange.
Settlement date
is named the date after a security has been traded on which the buyer must deliver cash to the seller and on the other hand, the seller must deliver the security to the buyer.
Severance payments
is a compensation which usually has the form of lump-sum cash payments which are paid by employers to workers who are made redundant for economic reasons.
Short interest position
is named the number of shares of a given company that have been sold short and, as of a given date, the loans remain outstanding.
Short sale
is named the sale of a security that is not owned by an investor but instead it is borrowed from a broker. The investor eventually repays the broker in kind by purchasing the same security in a subsequent transaction.
Simple deposit multiplier
is named the multiplier which increases the deposits generated from an increase in the banking system's reserves in a simple model in which the behavior of depositor and bank does not have any effect.
Simple linear regression (Ordinary Least Squares)
it is a statistical model of the linear relationship between two random variables in which one variable is hypothesized to be linearly related to the other. This relationship is depicted by a regression line which is straight line, "fitted" to pairs of values of the two variables, so that the sum of the squared random error terms is minimized.
Simple loan
is named a credit market instrument which provides to the borrower an amount of funds that must be repaid the lender at the loan maturity date along with an additional payment which is in the form of interest.
Sinking fund
is named a series of periodic payments which are made by a bind issuer to reduce, in an orderly manner, the amount of outstanding principal on a bond issue over the life of the bond.
Size effect
is named an empirical regularity whereby stock returns appear to differ consistently across the spectrum of market capitalization. Over extended periods of time, smaller capitalization stocks have outperformed larger capitalization stocks on a risk-adjusted basis.
Slutsky theorem
states that the probability limit of a nonlinear function of a variable is equal to the nonlinear function of the probability limit of that variable i.e. plim f(x) = f (plim x).
Small country assumption
are working assumption that real and financial conditions abroad are unaffected by domestic economic developments.
Soft budget constraint
is an expression which it is used to describe the situation of state-owned firms whose losses are automatically covered by the government budget.
Special drawing rights
is named the reserve money which is created by the IMF in 1967 and they are allocated based on quotas in order to be used among central banks as an additional source of liquidity.
Special offering
is named a trade which involves a large block of stock on an organized security exchange whereby several brokerage firms try to execute the order by soliciting offsetting orders from their customers.
Specialist
is named the dealer-broker who operates in an exchange and has the task to maintain orderly trading of the set of securities for which he is responsible.
Specialist block purchase or sale
is named the accommodation of a relatively small block trade by a specialist, who buys or sells from his or her inventory at a price negotiated with the seller or buyer.
Spectral analysis
is named the technique in which a time series is decomposed into a sum of periodic functions (i.e. sine curves) plus an error term. The estimation process contains the finding of the amplitude, the period and the phrase of these curves.
Speculative attacks
are called the sudden loss of foreign exchange reserves of central banks which arise as a result of the expected imminent devaluation by exchange market participants.
Speculative grade bonds (junk bonds)
are named all those bonds which investment grade bonds are not. Usually, speculative bonds have an investment grade BB (S&P's) or Ba (Moody's) or lower rating.
Speculator
is called that investor in future contracts whose primary objective is to make a profit from buying and selling these contracts.
Split funding
is known as the situation in which an institutional investor divides its funds among two or more professional money managers.
Spot transaction
is named the major type of exchange rate transaction that involves the immediately exchange of bank deposits which are denominated in different currencies.
Spurious correlation
is named the correlation induced by the method of handling the data while it is not presented in the original data.
Stabilization policies
are called all those policies which are designed to stabilize aggregate income and spending as well as unemployment.
Standard deviation
is a measure of the dispersion of possible outcomes around the expected outcome of a random variable.
Standard deviation of the random error (residual standard deviation)
in the framework of simple linear regression, it is the measure of the dispersion of possible outcomes of the random error term.
Standard error of alpha (a)
is named the standard deviation of a security's estimated alpha as derived from the ex-post characteristic line.
Standard error of bete (b)
the standard deviation of a security's estimated beta, as derived from the ex post characteristic line.
Standardized unexpected earnings
is called the difference between a firm's actual earnings over a given period less an estimate of the firm's expected earnings, with this quantity divided by the standard deviation of the firm's previous earnings forecast errors.
Standly agreement
is named an arrangement which take place between a security issuer and an underwriter as part of a rights offering. The underwriter agrees to purchase at a fixed price all securities not purchased by current stockholders.
Steady state
is named a hypothetical situation in which all variables have responded fully to exogeneous changes in the environment.
Sterilization
is named a set of actions which are undertaken by central banks with aim to offset the impact of a foreign exchange intervention on the domestic money supply. Usually takes the form of a money market purchase or sale of securities in the same amount as the foreign exchange market intervention.
Stochastic process risk
in the framework of immunization it is the risk that the yield curve will shift in a way that prevents an immunized bond portfolio from producing its expected cash inflows.
Stock dividend
is named an accounting transaction that distributes stock to existing shareholders in proportion to the number of shares currently owned by the shareholders. A stock dividend involves a transfer from retained earnings to the capital stock account of a currency account that is equal to the market value of the dispersed stock.
Stock split
is named an accounting transaction that increases the volume of stock held by existing shareholders in proportion to the number of shares currently owned by the shareholders. A stock split involves a decrease in the par value of the corporation's stock and the simultaneous exchange of a multiple number of new shares for each existing share.
Stop limit order
is named a trading order that stipulates both a stop price and a limit price. If the security's price reaches or passes the stop price, then a limit order is created at the limit price.
Stop loss oder (stop order)
is named a trading order that stipulates a stop price. If the security's price reaches or passes the stop price, then a market order is created.
Stop price
is named the price specified by an investor when a stop order or a stop limit order is placed that defines the price at which the market value order or limit order for the security is to become effective.
Straddle
is named a strategy with options which involves the purchase of both a call and a put option on the same asset, with the options to have the same exercise price and expiration date.
Straight line method
is named a method which involves the estimation of depreciation for corporate income tax purposes that allocates the cost of a fixed asset equally over the estimated useful life of the asset.
Stress testing
is named the process of determining how much the value of a portfolio can fall under abnormal market conditions. Stress testing entails of generating worst-case stress scenarios (i.e. a stock market crash) and revaluing a portfolio under those stress scenarios.
Strong form market efficiency
is named a version of market efficiency in which all relevant information, both public and private, is fully and immediately reflected in security prices.
Structural model
is called a description of how the economy operates using a collection of equations that describe the behavior of business firms and consumers in many sectors of the economy.
Structural model evidence
is named the evidence that examines if one variable affects another by using data with aim to build a model illustrating the channels through which this variable affects the order.
Structural unemployment
is named the unemployment which arise as the result of a mismatch between the demand and supply of labour.
Subordinated debenture
is named a debenture whose claims, in the event of bankruptcy, are junior to the other bonds issued by the firm.
Subscription price
is named the price at which holders of rights are permitted to purchase shares of stock in a right offering.
Substitution effect
is named that part of the total change in quantity demanded that is attributable to the change in relative prices.
Substitution swap
is named a type of bond swap where an investor exchanges one bond with a lower yield for another with a high yield while both bonds have essentially the same financial characteristics.
Sufficient statistic
is named an estimator that uses all the information which are contained in the sample in the logic that we would make the same parameter estimate whether we were told the whole set of observations or only the value of the sufficient statistic.
Super designated order turnaround (Super DOT)
is named a set of special procedures established by the New York Stock Exchange in order to handle routine small trading orders. Though these procedures the participating member firms can route orders directly to the specialist for immediate execution.
Supply curve
is named the relationship between the quantity supplied and the price when all other economic variables are held constant.
Supply of capital
is named the quantity of capital which is offered by investors at varying interest rate levels.
Supply side
is named the productive potential of an economy and the factors that determine its overall efficiency.
Supply to sell schedule
is named a description of the quantities of a security that an investor is prepared to sell at alternative prices.
Sustainable earnings
are called the amount of earnings that a firm could pay out each year. The result is that the firm's future earnings neither increase nor decrease.
Swap transaction
is named an exchange of sums of money of the same currency but on different terms i.e. selling euros for delivery now while simultaneously buying them back for delivery in three months' time.
Syndicate (purchase group)
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.
Synthetic futures contract
is named the creation of a position equivalent to either the purchase of a futures contract by buying a call option and writing a put option on the asset or the sale of a futures contract by buying a put option and writing a call option on the asset.
Synthetic put
is named a form of portfolio insurance that matches the investment outcomes of a put option by a dynamic asset allocation strategy.
Systematic risk
is named that part of an asset's risk that is related to market risk and for this reason cannot be eliminated by diversification.
