Dictionary
- Efficient Diversification
- The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.
- Efficient Market Hypothesis (EMH)
- In general the hypothesis states that all relevant information is fully and immediately reflected in a securitys market price thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all publicly available information) and strong form (stock prices reflect all relevant information including insider information).
- Elasticity (of an option)
- Percentage change in the value of an option given a 1% change in the value of the option`s underlying stock.
- Elliott Wave Theory
- Elliott is a method of analysing markets based on patterns of past price action and how these patterns relate to a simple master plan. The master plan is that there is an impulse wave consisting of 5 parts, followed by a corrective wave, usually of 3 parts but which can get somewhat complex. The master plan has a number of rules in particular relating to the relationships between the various waves and uses Fibonacci numbers including the "Golden" ratio of 61.8%. Elliott is a very optimistic theory as down moves are always corrective and new impulse moves always go to new highs eventually.
- EMU
- European Monetary Union