M |
| Fifth
letter of a Nasdaq stock symbol specifying that the issue is the company's fourth class of preferred shares. |
MBO |
| See:
Management buyout |
MBSCC |
| See:
Mortgage-Backed Securities Clearing Corporation |
MDA |
| See:
Multiple discriminant analysis |
MHS |
| See:
Manufactured housing securities |
MIP |
| See:
Monthly income preferred security |
MIT |
| See:
Market-if-touched |
MLP |
| See:
Master limited partnership |
MMDA |
| See:
Money market demand account |
MNC |
| See:
Multinational corporation |
MSCI |
| See:
Morgan Stanley Capital International |
Macaroni defense |
| A
tactic used by a corporation that is the target of a hostile takeover bid
involving the issue of a large number of bonds that must be redeemed at a higher value if the company is taken over. |
Macaulay duration |
| The
weighted-average term to maturity
of the cash flows from a bond, where the weights are the present value of the cash
flow divided by the price. |
Macroeconomics |
| Analysis
of a country's economy as a whole. |
Madrid
Stock Exchange (Bolsa de Madrid) |
| The
largest of Spain's four stock exchanges. |
Magic of diversification |
| The
effective reduction of risk
(variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). Related: Markowitz diversification. |
Mail float |
| Time
period that checks for payment spend in the postal system. |
Maintenance call |
| A
call for additional money or securities when a margin
account falls below its exchange-mandated required level. |
Maintenance fee |
| A
yearly charge to maintain brokerage accounts, such as asset management accounts or IRAs. |
Maintenance margin requirement |
| A
sum, usually smaller than but part of the original margin, that must be maintained on deposit at all times. If a customer's equity in any futures
position drops to or below, the maintenance margin level, the broker must issue
a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. Related: Margin, margin call. |
Majority shareholder |
| A
shareholder who is part of a group that controls more than half the outstanding shares
of a corporation. |
Majority
voting |
| Voting system under which corporate shareholders vote for each director separately. Related: Cumulative voting. |
Make a market |
| Dealers are said to make a market
when they quote bid and offered
prices at which they stand ready to buy and sell. |
Make
whole provision |
| Related to the lump-sum payments made when a loan or bond is called, equal to the NPV of future loan or coupon payments not paid because of the call. The payment can be significant and negate the attractiveness of a call. |
Making delivery |
| Refers
to the seller's actually turning over to the buyer the assets agreed upon in a forward
contract. |
Malaysia Commodity Exchange |
| A
subsidiary of the KLSE that trades interest rate
futures on the three-month Kuala Lumpur Interbank offered rate. |
Maloney Act |
| 1938
legislation amending the Securities Exchange Act that regulates the OTC market. |
Managed
account |
| An investment
portfolio one or more clients entrusted to a manager who decides how to invest it. |
Managed float |
| Also
known as "dirty" float, this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations. |
Management |
| The
people who administer a company, create policies, and provide the support necessary to implement the owners' business objectives. |
Management buying |
| The
acquisition of a controlling interest
in a promising business by an outside investment
group that retains existing management and places representatives on the board of directors. |
Management buyout (MBO) |
| Leveraged buyout whereby the acquiring group is led by the firm's management. |
Management/closely held shares |
| Percentage
of shares held by persons closely related to a company, as defined by the Securities and Exchange Commission.
Part of these percentages often are included in "institutional holdings"--making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company. |
Management discussion and analysis (MD&A) |
| A
report from management to shareholders
that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial statements in the annual report. |
Management fee |
| An
investment advisory fee charged by the financial adviser to a fund typically on the basis of the fund's average assets,
but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases. |
Managerial decisions |
| Decisions
concerning the operation of the firm, such as the choice of firm size, firm growth rates, and employee compensation. |
Managing underwriter |
| The
leading firm in an underwriting
group, which originates the deal and acts as an agent
for the group. |
Mandatory convertibles |
| A
debt instrument that is exchangeable at some point for equity in the form of common
stock or a new issue. |
Mandatory redemption schedule |
| Schedule
according to which bond sinking fund
payments must be made. |
Manipulation |
| Dealing
in a security to create a false appearance of active trading, in order to bring in more traders. Illegal. |
Manufactured housing securities (MHS) |
| Loans on manufactured homes-that is, factory-built or prefabricated housing, including mobile homes. |
Maple Leaf |
| A
gold, silver, or platinum coin minted in Canada that usually trades at slightly more than its current bullion value. |
Margin |
| Allows
investors to buy securities
by borrowing money from a broker.
The margin is the difference between the market
value of a stock and the loan a broker makes. Related: Security deposit (initial). |
Margin account (stocks) |
| A
leverageable account in which stocks
can be purchased for a combination of cash
and a loan. The loan in the margin account is collateralized by the stock; if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers. |
Margin agreement |
| The
agreement governing customers' margin
accounts. |
Margin
call |
| A demand for additional funds because of adverse price movement. Maintenance margin requirement,
security deposit maintenance. |
Margin department |
| The
department in a brokerage firm that monitors customers' margin accounts, ensuring that all short sales, stock
purchases, and other positions
are covered by the margin account
balance. |
Margin of profit |
| Gross
profit divided by net sales. Used to measure a firm's operating efficiency and pricing policies in order to determine how competitive the firm is within the industry. |
Margin requirement (options) |
| The
amount of cash an uncovered (naked) option writer
is required to deposit and maintain to cover
his daily position valuation and reasonably foreseeable intraday price changes. |
Margin of safety |
| With
respect to working capital management,
the difference between (1) the amount of long-term financing and (2) the sum of fixed assets and the permanent component of current assets. |
Margin security |
| A
security that may be bought or sold in a margin account as defined in Regulation T. |
Marginal |
| Incremental. |
Marginal cost |
| The
increase or decrease in a firm's total cost of production as a result of changing production by one unit. |
Marginal efficiency of capital |
| The
percentage yield earned on an additional unit of capital. |
Marginal
revenue |
| The change in total revenue as a result of producing one additional unit of output. |
Marginal tax rate |
| The
tax rate that would have to be paid on any additional dollars of taxable income earned. |
Marginal utility |
| The
change in total satisfaction as a result of consuming one additional unit of a specific good or service. |
Marital deduction |
| A
tax deduction that allow spouses to transfer unlimited amounts of property to one another. |
Mark-to-market |
| Adjustment
of the book value or collateral
value of a security to reflect current market value. |
Marketability |
| A
negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold. |
Marketable securities |
| Securities that are easily convertible to cash because there is high demand allowing them to be sold quickly. |
Marketable title |
| A
clear, reasonably incontestable title to a piece of real estate that is good for transaction purposes. |
Markdown |
| The
amount subtracted from the selling price of securities
when they are sold to a dealer
in the OTC market. Also, the discounted price of municipal bonds after the market
has shown little interest in the issue
at the original price. |
Mark-to-market |
| Adjustment
of the book value or collateral
value of a security to reflect current market value. |
Marked-to-market |
| An
arrangement whereby the profits
or losses on a futures contract
are settled each day. |
Market |
| Usually refers to the equity market. "The market went down today" means that the value of the stock market dropped that day. |
Market analysis |
| An
analysis of technical corporate and market
data used to predict movements in the market. |
Market-book ratio |
| Market price of a share
divided by book value per share. |
Market break |
| See:
Break |
Market capitalization |
| The
total dollar value of all outstanding
shares. Computed as shares times current market price. Capitalization is a measure of corporate size. |
Market capitalization rate |
| Expected return on a security.
The market-consensus estimate of the appropriate discount
rate for a firm's cash flow. |
Market clearing |
| Total
demand for loans by borrowers equals total supply of loans from lenders. The market, any market, clears at the equilibrium rate of interest or price. |
Market conversion price |
| Also
called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security
and then exercising the conversion option. This price is equal to the market price of the convertible
security divided by the conversion ratio. |
Market cycle |
| The
period between the two latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15% below the highest point or 15% above the lowest point (ending a down market). |
Market Eye |
| A
financial information service based in the U.K. sponsored by the ISE (International Stock Exchange of the U.K. and the Republic of Ireland) that provides current market and statistical information. |
Market impact costs |
| The
result of a bid/ask spread
and a dealer's price concession. Also called price impact costs. |
Market index |
| Market
measure that consists of weighted values of the components that make up certain list of companies. A stock market tracks the performance of certain stocks by weighting them according to their prices and the number of outstanding shares
by a particular formula. |
Market
jitters |
| Anxiety among many investors, causing them to sell stocks and bonds,
pushing prices down. |
Market
letter |
| A newsletter analyzing the market that is written by an SEC-registered investment
adviser who sells the letter to subscribers. See: Hulbert Rating. |
Market maker |
| Used
in the context of general equities. One who maintains firm bid and offer
prices in a given security
by standing ready to buy or sell round lots at publicly quoted prices. See: Agent, dealer,
and specialist. |
Market model |
| The
market model says that the return
on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured by beta. The return also depends on conditions that are unique to the firm. The market model can be graphed as a line fitted to a plot of asset returns against returns on the market portfolio. This relationship is sometimes called the single-index model. |
Market-on-Close (MOC) order |
| An
order to trade
stocks, options,
or futures as close as possible to the market close. |
Market
opening |
| The start of formal trading on an exchange. |
Market order |
| Used
in the context of general equities. Order
to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. You cannot specify special restrictions such as all or none (AON) or good
'til cancelled order (GTC) on market orders. See: Limit order. |
Market order go-along/participating |
| Used
for listed equity securities. See: Percentage
order. |
Market out clause |
| A
clause that may appear in an underwriting
firm commitment that releases it from its purchase requirement if there are negative securities market developments. |
Market overhang |
| The
theory that, in certain situations, institutions wish to sell their shares but postpone the sale because large orders under current market conditions would drive down the share price and that the consequent threat of securities sales will tend to retard the rate of share price appreciation. Support for this theory is largely anecdotal. |
Market penetration/share |
| Used
in the context of general equities. Percent of trading
volume in a stock that a particular market maker trades. |
Market Performance Committee (MPC) |
| A
group of NYSE market oversight specialists who monitor specialists' efficiency in maintaining fair prices and orderly markets. |
Market portfolio |
| A
portfolio consisting of all assets available to investors,
with each asset held in proportion to its market value relative to the total market value of all assets. |
Market price |
| The
last reported price at which a security
was traded on an exchange. |
Market price of risk |
| A
measure of the extra return,
or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio. |
Market prices |
| The
amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration. |
Market research |
| A
technical analysis of factors such as volume, price trends,
and market breadth that are used to predict price movement. |
Market return |
| The
return on the market
portfolio. |
Market
risk |
| Risk
that cannot be diversified
away. Related: Systematic risk |
Market sectors |
| The
classifications of bonds by issuer
characteristics, such as state government, corporate, or utility. |
Market segmentation theory or preferred habitat theory |
| A
biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity
sector. |
Market share |
| The
percentage of total industry sales that a particular company controls. |
Market sweep |
| A
second offering following a tender offer, allowing institutional
investors to obtain a controlling interest
at a price higher than the original offer. |
Market timer |
| A
money manager who assumes he or she can forecast when the stock market will go up and down. |
Market timing |
| Asset allocation in which investment in the equity market is increased if one forecasts that the equity market will outperform T-bills and is decreased when the market is anticipated to underperform. |
Market timing costs |
| Costs
that arise from price movement of a stock
during a transaction period but attributable to other activity in the stock. |
Market tone |
| The
general state of well-being of a securities
market, based mostly on trading
activity. |
Market-if-touched
(MIT) |
| A price order,
below market if a buy
or above market if a sell, that automatically becomes a market order if the specified price is reached. |
Market value |
| (1)
The price at which a security
is trading and could presumably be purchased or sold. (2) What investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the current market
price of a firm's shares. |
Market value ratios |
| Ratios
that relate the market price
of the firm's common stock
to selected financial statement items. |
Market value-weighted index |
| An
index of a group of securities
computed by calculating a weighted average of the returns on each security in the index, where the weights are proportional to outstanding market
value. |
Marketed claims |
| Claims
that can be bought and sold in financial markets, such as those of stockholders and bondholders. |
Marketplace price efficiency |
| The
degree to which the prices
of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy. |
Marking up or down |
| The
amount by which a securities dealer
raises or lowers the price of a stock
or bond due to changes in demand and supply. |
Markowitz, Harry |
| Nobel
laureate in economics. Father of modern portfolio
theory. |
Markowitz
diversification |
| A strategy that seeks to combine in a portfolio assets with returns
that are less than perfectly positively correlated, in an effort to lower portfolio risk
(variance) without sacrificing return.
Related: Naive diversification. |
Markowitz efficient frontier |
| The
graphical depiction of the Markowitz efficient set of portfolios
representing the boundary of the set of feasible portfolios
that have the maximum return
for a given level of risk. Any portfolios above the frontier cannot be achieved. Any below the frontier are dominated by Markowitz efficient portfolios. |
Markowitz efficient portfolio |
| Also
called a mean-variance efficient portfolio,
a portfolio that has the highest expected return at a given level of risk. |
Markowitz efficient set of portfolios |
| The
collection of all efficient portfolios,
which can be graphed as the Markowitz efficient frontier. |
Marriage penalty |
| A
tax that has the effect of penalizing a married couple because they pay more tax on a joint tax return than they would if they file tax returns individually. |
Married put |
| A
put option bought at the same time as its underlying securities in order to hedge the price paid for the securities. |
Master limited partnership (MLP) |
| A
publicly traded limited partnership. |
Matador market |
| The
foreign market in Spain. |
Match-fund |
| A
bank is said to match-fund a loan
or other asset when it does so by buying (taking) a deposit of the same maturity. The term is commonly used in the Euromarket. |
Matched book |
| A
bank runs a matched book when the of maturities
of its assets and liabilities
is distribution equal. |
Matched
and lost |
| The outcome of the flip of a coin used to determine which of two brokers who are locked in competition for equal trades may actually execute
the trades. |
Matched maturities |
| The
coordination by a financial institution of the maturities of its assets (loans) and liabilities
(deposits) in order to enable it to meet its obligations at the required times. |
Matched orders |
| Used
for listed equity securities. Participate in equal amounts of a trade at a certain price, particularly when two parties have the same level of priority on the exchange
floor (this requires standing in the trading
crowd). |
Matched sale transaction |
| Applies
mainly to convertible securities. Procedure whereby the Federal Reserve Bank of New York sells government securities to a nonbank dealer
against payment in federal funds. The agreement requires the dealer to sell the securities back by a specified date, which ranges from 1 to 15 days. The Fed pays the dealer a rate of interest equal to the discount rate. These transactions, also called reverse repurchase agreements, decrease the money supply for temporary periods by reducing dealers' bank balances and thus excess reserves. |
Matching
concept |
| The accounting principle that requires the recognition of all costs that are associated with the generation of the revenue reported in the income statement. |
Materiality |
| The
importance of an event or information in influencing a company's stock price. |
Materials requirement planning |
| Computer-based
systems that plan backward from the production schedule to make purchases in order to manage inventory levels. |
Mathematical programming |
| An
operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming. |
Matif SA |
| The
futures exchange
of France. |
Matrix trading |
| Swapping
bonds in order to take advantage of temporary differences in the yield spread between bonds
with different ratings or different classes. |
Mature |
| To cease to exist; to expire. |
Mature economy |
| The
economy of a nation with a stable population and slowing economic growth. |
Maturity |
| For
a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing
interest. |
Maturity
date |
| Usually used for bonds. Date that the bond finishes and is paid off. Date on which the principal amount of a note,
draft, acceptance, bond,
or other debt instrument becomes due and payable. |
Maturity factoring |
| An
arrangement that provides collection and insurance of accounts receivable. |
Maturity phase |
| A
stage of company development in which earnings
to grow at the rate of the general economy. Related: Three-phase DDM. |
Maturity spread |
| The
difference in returns between bonds of different time lengths. |
Maturity value |
| Related:
Par value |
Maximum
capital gains mutual fund |
| A
mutual fund whose objective is to produce capital gains by investing in small or risky rapid-growth companies. |
Maximum price fluctuation |
| The
greatest amount by which the contract
price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. Related: Limit price. |
May
Day |
| The date of May 1, 1975, after which brokers were allowed to charge any brokerage commission, rather than a mandatory rate. |
May expand |
| Used
in the context of general equities. Warning that the size of the order/total
may be increased. See: "more behind it." |
MBS depository |
| A
book-entry depository for GNMA
securities. The depository was initially operated by MBSCC and is now a separately incorporated, participant-owned, limited-purpose trust company organized under the State of New York Banking Law. |
MBS servicing |
| The
requirement that the mortgage
servicer maintain payment of the full amount of contractually due principal and interest
payments whether or not actually collected. |
Meals and entertainment expense |
| A
tax deduction allowed for meals and entertainment expenses incurred in the course of business. |
Mean |
| The
expected value of a random variable.
Arithmetic average of a sample. |
Mean
return |
| See: Expected
return |
Mean of the sample |
| The
arithmetic average; that is, the sum of the observations divided by the number of observations. |
Mean-variance analysis |
| Evaluation
of risky prospects based on the expected value and variance
of possible outcomes. |
Mean-variance
criterion |
| The selection of portfolios based on the means
and variances of their returns.
The choice of the higher expected return
portfolio for a given level of variance or the lower variance portfolio for a given expected return. |
Mean-variance efficient portfolio |
| Related:
Markowitz efficient portfolio |
Measurement error |
| Errors
in measuring an explanatory variable
in a regression, which leads to biases in estimated parameters. |
Medium-term bond |
| A
bond maturing in two to ten years. |
Medium-term note |
| A
corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer.
Investors can select from maturity
bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years. |
Meff Renta Fija |
| The
derivatives exchange in Barcelona, Spain, listing futures and options
on fixed interest securities
and on interest rates, including the MIBOR (Madrid Interbank Offered Rate). |
Meff Renta Variable |
| Spain's
screen-based trading of stock
index and equity
derivatives market in Spain trading futures
and options on the Iberian Exchange (IBEX)-35 index and on individual stocks. |
Member
bank |
| A national- or state-chartered bank that is a member of the Federal Reserve System. |
Member firm |
| Used
for listed equity securities. Brokerage firm that has at least one membership on a major stock exchange even though, by exchange rules, the membership is in the name of an employee and not the firm itself. |
Member short sale ratio |
| The
total shares sold short
by NYSE members divided by total short sales, which is used to analyze market expectations and bullish
or bearish trends. |
Membership or a seat on the exchange |
| A
limited number of exchange
positions that enable the holder to trade for the holder's own accounts and charge clients for the execution of trades
for their accounts. Related: Member firm. |
Menu |
| Used
in the context of general equities. Hierarchy of choices concerning price and volume of bids or offers
proposed to a customer (e.g., menu of offerings to a customer buyer: (1) 10m @ 24 1/4; (2) 25m @ 24 1/2; or (3) 50m @ 24 3/4). |
The Merc |
| Shorthand
for Chicago Mercantile Exchange. |
Mercantile agency |
| An
organization that supplies credit ratings and reports on firms that are prospective customers. |
Mercato Italiano Futures (MIF) |
| The
Italian futures market trading
Italian Treasury bond (BTF) futures. |
Merchandise |
| All
movable goods such as cars, textiles, or appliances. |
Merchant bank |
| A
British term for a bank that specializes not in lending its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues,
and providing advice on acquisitions,
mergers, foreign
exchange, or `portfolio management. |
Merger |
| (1)
Acquisition in which all assets
and liabilities are absorbed by the buyer. (2) More generally, any combination of two companies. The firm's activity in this respect is sometimes called M&A (merger and acquisition) |
Mexican Stock Exchange |
| The
only stock exchange in Mexico. The Indice de Precios y Cotizaciones, or IPC index, consists of the 35 most representative stocks chosen every two months. |
Mezzanine bracket |
| The
members of an underwriting group with involvement large enough to be just below the top tier. |
Mezzanine financing |
| The
stage of financing that follows venture capital financing. |
Mezzanine level |
| The
period in a company's development just before it goes public. |
Microeconomics |
| Analysis
of the behavior of individual economic units such as companies, industries, or households. |
Midcap |
| A
stock with a capitalization
of usually between $1 billion and $5 billion. |
Midcap SPDRs |
| This
is the same as a SPDR, except that the index it tracks is Standard & Poor's Midcap 400. This SPDR also trades on the AMEX, under the symbol MDY. |
Milan Stock Exchange |
| The
largest regional stock exchange
in Italy, facilitating more than 90% of the country's trading volume. |
Miller, Merton |
| Nobel
Laureate and co-author of the famous Miller-Modigliani theorems. Finance professor at the University of Chicago. |
Mimic |
| An
imitation that sends a false signal. |
Mini-manipulation |
| Trading in the underwriting security of an option contract in order to manipulate its price so that the options will become in
the money. |
Minimum maintenance |
| The
lowest required equity level that must be held with a broker in a margin
account. See: Margin call. |
Minimum price fluctuation |
| Smallest
increment of price movement possible in trading
a given contract. Also called point or tick. |
Minimum purchases |
| For
mutual funds, the amount required to open a new account (minimum initial purchase) or to deposit into an existing account (minimum additional purchase). These minimums may be reduced for buyers participating in an automatic purchase plan |
Minimum-variance frontier |
| Graph
of the lowest possible portfolio
variance that is attainable for a given portfolio expected
return. |
Minimum-variance portfolio |
| The
portfolio of risky
assets with lowest variance. |
Minority interest |
| An
outside ownership interest in a subsidiary
that is consolidated with the parent for financial reporting purposes. |
Minus |
| The
symbol (-) that precedes the change figure in a stock table to indicate a closing sale lower than that of the previous day. |
Minus tick |
| See:
Downtick |
Misery
index |
| An index
that sums the unemployment and inflation
rates, used as a political rating or measure of consumer confidence. |
Mismatch bond |
| Floating-rate note whose interest
rate is reset at more frequent intervals than the rollover period (e.g., a note whose payments are set quarterly on the basis of the one-year interest rate). |
Miss the price/market |
| Used
for listed equity securities. (1) Have an order
in hand but fail to execute
a transaction on terms favorable to a customer and, thus, be negligent as a broker; (2) receive an order just after a print has transpired. |
Mixed account |
| A
brokerage account holding both long
and short positioned
securities. |
Mixed
bag |
| Used in the context of general equities. Group of stocks including some that are up, some down, and some neutral. |
Mob spread |
| The
yield spread between a tax-free municipal bond and a Treasury
bond with the same maturity. |
Mock trading |
| The
simulated trading of securities
used as a learning device in training investors
and brokers. |
Modeling |
| The
process of creating a depiction of reality, such as a graph, picture, or mathematical representation. |
Modern portfolio theory |
| Principles underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification. |
Modified Accelerated Cost Recovery System (MACRS) |
| A
1986 act that set out rules for the depreciation
of qualifying assets, allowing for greater acceleration over longer periods of time. |
Modified duration |
| The
ratio of Macaulay duration to (1 + y), where y = the bond yield.
Modified duration is inversely related to the approximate percentage change in price for a given change in yield. |
Modified pass-throughs |
| Agency pass-throughs that guarantee (1) timely interest payments and (2) principal
payments as collected, but no later than a specified time after they are due. Related: Fully modified pass-throughs. |
Modigliani and Miller Proposition I |
| A
proposition by Franco Modigliani and Merton Miller that states that a firm cannot change the total value of its outstanding securities
by changing its capital structure
proportions. Also called the irrelevance proposition. |
Modigliani and Miller Proposition II |
| A
proposition by Franco Modigliani and Merton Miller that states that the cost of equity is a linear function of the firm's debt/equity-ratio. |
Momentum |
| The
amount of acceleration of an economic, price, or volume
movement. A trader who follows a movement strategy will purchase stocks that have recently risen in price. |
Momentum indicators |
| Indicators used in market
analysis to quantify the momentum
of upward and downward price movements. |
M-1, M-2, and M-3 |
| See:
Money supply |
MONEP (Marche des Options Negociables de Paris) |
| A
subsidiary of the Paris
Bourse that trades stock and index options. |
Monetarist |
| An
economist who believes that changes in the money supply are the most important determinants of economic activity and economic cycles. |
Monetary gold |
| Gold
held by government authorities as a financial asset. |
Monetary indicators |
| Economic
indicators of the effects of monetary policy, such as the condition of the credit market. |
Monetary/nonmonetary method |
| Under
this translation method, monetary items (e.g. cash,
accounts payable and receivable,
and long-term debt) are represented at the current rate, while nonmonetary items (e.g., inventory, fixed
assets, and long-term investments) are represented at historical rates. |
Monetary policy |
| Actions
taken by the Board of Governors of the Federal
Reserve System to influence the money
supply or interest rates. |
Monetize the debt |
| Financing
the national debt by printing new money, which causes inflation as a result of a larger money supply. |
Money |
| Currency
and coin that are guaranteed as legal tender by the government. |
Money base |
| Composed
of currency and coins outside the banking system plus liabilities to the deposit money banks. |
Money center banks |
| Banks
that raise most of their funds from the domestic
and international money markets,
relying less on depositors for funds. |
Money management |
| Related:
Investment management |
Money manager |
| Related:
Investment manager |
Money market |
| Money
markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S. government bonds, Treasury bills and commercial
paper from banks and companies. |
Money market demand account (MMDA) |
| An
account that pays interest
based on short-term interest rates. |
Money market fund |
| A
mutual fund that invests only in short-term securities,
such as banker's acceptances, commercial
paper, repurchase agreements,
and government bills. The net
asset value per share is maintained at $1.00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities or the fund may have private insurance protection. |
Money market hedge |
| The
use of borrowing and lending transactions in foreign
currencies to lock in the home currency value of a foreign currency transaction. |
Money market notes |
| Publicly
traded issues
that may be collateralized by mortgages
and mortgage backed securities (MBS). |
Money order |
| A
financial instrument backed by a deposit at a certain firm such as a bank that can be easily converted into cash. |
Money purchase plan |
| A
defined benefit contribution
plan in which the participant contributes some part and the firm contributes at the same or a different rate. Also called an individual account plan. |
Money rate of return |
| Annual
money return as a percentage of asset value. |
Money supply |
| M1-A:
Currency plus demand deposits. M1-B: M1-A plus other checkable deposits. M2:
M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits. M3:
M-2 plus large time deposits and term
repos. L: M-3 plus other liquid assets. |
Monitor |
| To
seek information about an agent's
behavior; a mechanism that provides such information. |
Monopoly |
| Market
characterized by absolute control of all sales and distribution in the market by one firm, due to some barrier to entry of other firms, allowing the firm to sell at a higher price than the societally optimal price. |
Monopsony |
| Market
characterized by the existence of only one buyer in a market, forcing sellers to accept a lower price than the societally optimal price. |
Monte Carlo simulation |
| An
analytical technique for solving a problem by performing a large number of trail runs, called simulations, and deducing a solution from the collective results of the trial runs. Method for calculating the probability distribution of possible outcomes. |
Monthly income preferred security (MIP) |
| Preferred stock issued by a subsidiary
located in a tax haven. The subsidiary relends the money to the parent. |
Monthly investment plan |
| A
plan in which a certain amount is invested each month in order to benefit from dollar cost averaging. |
Montreal Exchange/Bourse de Montreal |
| The
oldest stock exchange in Canada trading stocks,
bonds, futures,
and options. The Canadian Market Portfolio Index (XXM) tracks the market performance of the 25 highest-capitalization stocks traded on at least two Canadian exchanges. |
Moody's investment grade |
| A
rating of one through four assigned by Moody's Investor Service to municipal short-term bonds. |
Moody's Investors Service |
| A
security and bond
rating agency publishing bond manuals and a common stock handbook annually. |
Moral hazard |
| The
risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g., an insured firm will take fewer fire precautions. |
Moral obligation bond |
| A
tax-exempt bond issued by a municipality
or a state financial intermediary that is backed by the moral, but not legal, obligation of a state government to appropriate funds in case of default. |
"More behind it" |
| Used
in the context of general equities. More stock
exists to be bought or sold by the same buyer or seller, respectively. Often, the buyer or seller does not disclose the full size of its buy or sell interest as not to affect the market adversely. See: May
expand. |
Morgan
Stanley Capital International (MSCI) |
| Publisher
of a number of well-known benchmarks,
such as the MSCI World Index. |
Morningstar
Rating System |
| A proprietary ranking of mutual funds and annuities
issued by Morningstar Inc. of Chicago. |
Mortality tables |
| Tables
of probability that individuals of various ages will die within one year. |
Mortgage |
| A
loan secured by the collateral
of some specified real estate property that obliges the borrower to make a predetermined series of payments. |
Mortgage-backed securities (MBS) |
| Investment
instruments backed by a pool of mortgage
loans. |
Mortgage-Backed
Securities Clearing Corporation (MBSCC) |
| A
wholly owned subsidiary of the Midwest Stock Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed MBS transacted for forward
delivery. |
Mortgage banker |
| A
company or individual that originates mortgage
loans and sells them to investors,
while taking care of borrowers'
loan payments, records, taxes, and insurance. |
Mortgage bond |
| A
bond whose issuer
has granted bondholders a lien against pledged assets.
See: Collateral trust bonds. |
Mortgage broker |
| A
company or individual that places mortgage loans with lenders, but does not originate or service loans like a mortgage banker. |
Mortgage duration |
| A
modification of standard duration
to account for the impact on duration of MBS
of changes in prepayment speed resulting from changes in interest rates. |
Mortgage interest deduction |
| A
federal tax deduction for interest paid on a mortgage
used to acquire, construct, or improve a residence. |
Mortgage life insurance |
| A
life insurance policy that pays off the remaining balance of the insured person's mortgage at death. |
Mortgage pass-through security |
| Also
called a pass-through, a security created when one or more mortgage holders form a collection (pool) of mortgages and sells shares or participation
certificates in the pool. The cash
flow from the collateral
pool is "passed through" to the securityholder as monthly payments of principal, interest,
and prepayments. This is the predominant type of MBS traded in the secondary
market. |
Mortgage
pipeline |
| The period from the taking of applications from prospective mortgage borrowers to the marketing of the loans. |
Mortgage pipeline risk |
| The
risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period. |
Mortgage pool |
| A
group of mortgages with similar class, interest rate,
and maturity characteristics. |
Mortgage rate |
| The
interest rate on a mortgage
loan. |
Mortgage
REIT |
| An REIT
that invests in loans secured by real estate that derives income from mortgage interest
and fees. |
Mortgage servicing |
| The
collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default,
involved with a mortgage loan. |
Mortgagee |
| The
lender of a loan secured by property. |
Mortgager |
| The
borrower of a loan secured by property. |
Moscow Interbank Currency Exchange (MICEX) |
| Established
in 1992, the most liquid and best organized financial exchange in Russia. |
Most active list |
| The
stocks with the highest volume of trading
on a certain day. |
Most distant futures contract |
| When
several futures contracts are considered, the contract settling last. Related: Nearby futures contract. |
Moving average |
| Used
in charts and technical analysis,
the average of security
or commodity prices
constructed in a period as short
as a few days or as long as several years, and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted. |
MTN |
| Medium-term
notes issued by corporations, much like shorter-term commercial paper. |
MUD |
| A
municipal utility district, which is a political subdivision that administers utility-related services, sometimes requiring the issue of special assessment bonds. |
Multicurrency clause |
| An
agreement in the case of a Euro
loan that permits the borrower to switch from one currency to another currency on a rollover date. |
Multicurrency loans |
| Give
the borrower the flexibility of drawing a loan
in different currencies. |
Multifactor
CAPM |
| A version of the capital asset pricing model derived by Robert Merton that includes extra-market sources of risk referred to as factors.
Related: Arbitrage pricing theory. |
Multifamily loans |
| Loans usually represented by conventional mortgages on multifamily rental apartments. |
Multinational corporation (MNC) |
| A
firm that operates in more than one country. |
Multioption financing facility |
| A
syndicated confirmed credit line with attached options. |
Multiperiod immunization |
| Creating
a portfolio that will be capable of satisfying more than one predetermined future liability regardless of interest
rate changes. |
Multiple-discriminant analysis (MDA) |
| Statistical
technique for distinguishing between two groups on the basis of their observed characteristics. |
Multiple-issuer pools |
| Under
the GNMA-II program, pools formed through the aggregation of individual issuers' loan packages. |
Multiple listing |
| An
agreement used by a broker
who is a member of a multiple-listing
organization, providing the exclusive right to sell, with the additional authority and obligation to distribute the listing to the other brokers in a multiple listing organization. |
Multiple peril insurance |
| Insurance policy that covers a wide variety of property damage. |
Multiple rates of return |
| More
than one rate of return from the same project that makes the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a different rate of return. |
Multiple regression |
| The
estimated relationship between a dependent variable
and more than one explanatory variable. |
Multiples |
| Another
name for price-earnings
ratios. |
Multiplier |
| In
the case of an investment a factor that quantifies the overall effects of investment spending on total income. In the case of deposit, a factor that shows the effects of a change in bank deposits on the total amount of outstanding credit and the money supply. |
Multirule system |
| A
technical trading
strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) with other trading systems. |
Municipal bond |
| Represents
borrowing by state or local governments to pay for special projects such as highways or sewers. The interest that investors
receive is exempt from some income taxes. |
Municipal bond insurance |
| An
insurance policy that guarantees payment on municipal
bonds in the event the issuer defaults. |
Municipal improvement certificate |
| A
certificate used to finance local government projects and services that are financed by a special tax assessment. Its interest is tax-free. |
Municipal Investment Trust (MIT) |
| A
unit investment trust that buys municipal bonds and usually holds them until maturity, passing the bond
income on to shareholders, usually tax-free. |
Municipal notes |
| Short-term
notes issued
by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues. |
Municipal revenue bond |
| A
bond issued to finance a public project that is funded by receipts from the project's operation. |
Mutilated security |
| A
certificate on which the name of the issue,
the issuer, or some other identifying detail cannot be read. |
Mutual association |
| A
savings and loan association
organized as a cooperative.
Members purchase shares, vote on association affairs, and receive income in the form of dividends. |
Mutual
company |
| A corporation that is owned by a group of members and that distributes income in proportion to the amount of business that members do with the company. |
Mutual exclusion doctrine |
| The
tenet that rules municipal bond
interest is federal tax-free. In return for this federal tax exemption, states and localities cannot tax interest generated by federal government securities. |
Mutual fund |
| Mutual
funds are pools of money that are managed by an investment company and regulated by the Investment Company Act of 1940. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load,
on investors when they buy
or sell shares. No-load funds impose no sales charge. Related: Open-end
fund, closed-end fund. |
Mutual fund cash-to-assets ratio |
| The
cash instruments portion of a mutual fund as a proportion of its total assets. |
Mutual fund custodian |
| A
commercial bank or trust company that holds securities
owned by a mutual fund and sometimes acts as transfer agent for the mutual
fund. |
Mutual fund theorem |
| A
result associated with the CAPM,
asserting that investors will choose to invest their entire risky portfolio
in a market index or mutual fund. |
Mutual offset |
| A
system, such as the arrangement between the Chicago
Mercantile Exchange (CME) and Singapore
International Monetary Exchange (SIMEX), that allows trading positions
established on one exchange
to be offset or transferred on another exchange. |
Mutual savings bank |
| A
state-chartered savings bank that is owned by its depositors and managed by a fiduciary board of trustees. |
Mutually exclusive investment decisions |
| Investment
decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects. |