EAFE Index
EAFE refers to Europe, Australia and the Far East. The index, which is compiled by Morgan Stanley, is an aggregate of 21 individual country indexes that collectively represent many of the major markets of the world.
Economic Earnings
The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.
Economic Indicator
An economic measure used to determine economic growth. Examples include GDP, Consumer Price Index, Money Supply, Trade Balance, Unemployment Rate, etc.
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).