Stock Fundamentals Quiz Prep Flashcards
What is a leading indicator? (Give definition and an example)
Economic series that usually reach peaks or troughs before corresponding peaks or troughs in aggregate economy activity. For example bond yields are thought to be a good leading indicator of the stock market because bond traders anticipate and speculate trends in the economy (even though they aren’t always right).
What is a coincident indicator? (Give definition and an example)
Economic series that have peaks and troughs that roughly coincide with the peaks and troughs in the business cycle. Personal income is a coincidental indicator for the economy: high personal income rates will coincide with a strong economy.
What is a lagging indicator? (Give definition and an example)
Economic series that experience their peaks and troughs after those of the aggregate economy. Unemployment is one of the most popular lagging indicators. If the unemployment rate is rising, it indicates that the economy has been doing poorly.
What is a mutual fund?
Mutual Funds are collective investment entities: they are portfolios sold to the public.
What are the 3 types of mutual funds?
Open-end funds
Close-end funds
Unit investment trusts
Open-end funds
can sell shares to the public every day and is to be able to buy back those shares at the end of any day.
Close-end funds
usually issue shares only once to the public in an initial public offering (IPO). Any investor who no longer wish to invest into the fund has to sell it to another investor: the fund will not buy shares back.
Unit investment trusts
also usually issue shares once, but they allow investors to sell back their shares to the fund. They often have a limited time span.
How do you calculate the value of a share of a mutual fund?
NAV= Market Value Assets - Liabilities/# of shares outstanding
What is an ETF?
It allows investors to buy and sell shares of a portfolio of securities.
What is the difference between a mutual fund and an ETF?
It is like a mutual fund but the difference is that it closely track an underlying index or portfolio and it is traded during the day, like a stock. Mutual funds are bought or sold only at the end of the day.
What is top-down approach to value a stock?
- ) First examine the influence of the general economy on all firms and the security markets
- ) Then analyze the prospects for various global industries with the best outlooks in this economic environment
- ) Finally turn to the analysis of individual firms in the preferred industries and to the common stock of these firms.
In what kind of industry would buy a stock during a time when the overall stock market is close to the lowest point?
Financial industry because it is a cyclical industry based on interest rates.
In what kind of industry would buy a stock during a time when the overall stock market is close to the highest point?
Precious metals
What are the five stages of the life cycle of an industry?
- ) Pioneering development
- ) Rapid accelerating growth
- ) Mature growth
- ) Stabilization & market maturity
- ) Deceleration of growth & decline