Dictionary
- Growth Investing
- An investment approach that favors the stocks of rapidly expanding companies with a high rate of earnings growth. Often, these are the stocks of start-up ventures or newer firms that are just entering high-growth industries. Because of their growth potential, their stock price often reflects investor opinion of future growth prospects (rather than current earnings), resulting in a high price-to-earnings ratio. Growth investing is often contrasted with value investing.
- Head and Shoulders
- A chart pattern indicating a peak, a decline, a second even higher peak, a decline, a rebound to the level of the first peak, and yet another decline. A head and shoulders pattern is supposed to be bad news, indicating the stock is headed downward.
- Hedge Ratio (for an option)
- Ratio between the change in an option’s theoretical value and the change in price of the underlying stock at a given point in time. Also called delta.
- Hedging
- Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change.
- Hedging Demands
- Demands for securities to hedge particular sources of consumption risk, beyond the usual mean-variance diversification motivation.