Briefly explain 13 vocabularies on stock exchange
1. Stock: A stock represents a share in the ownership of a company and constitutes a claim on part of the company's assets and earnings.
2. Stock Exchange: A stock exchange is a regulated marketplace where securities, such as stocks and bonds, are bought and sold by investors.
3. Dividend: A dividend is a payment made by a corporation to its shareholders, usually in the form of cash or additional shares of stock.
4. Initial Public Offering (IPO): An IPO is the first sale of a company's shares to the public, marking its transition from a private company to a publicly traded one.
5. Market Capitalization: Market capitalization, or market cap, represents the total value of all outstanding shares of a company's stock, calculated by multiplying the share price by the number of outstanding shares.
6. Price-to-Earnings ratio (P/E): The P/E ratio is a valuation ratio calculated by dividing the market price of a stock by its earnings per share. It is used by investors to determine the relative value of a company compared to its peers.
7. Bid and Ask: The bid price is the highest price a buyer is willing to pay for a security, while the ask price is the lowest price a seller is willing to accept. The difference between the bid and ask prices is called the bid-ask spread.
8. Trading Volume: Trading volume is the total number of shares of a security that have been bought and sold during a specified period, usually a day.
9. Bear and Bull Market: A bear market refers to a period of declining stock prices, while a bull market is characterized by rising stock prices. These terms are used to describe the overall trend of the stock market.
10. Index: A stock market index is a measurement of the average performance of a group of stocks, representing a sample of the overall market or a specific industry sector.
11. Blue Chip Stocks: Blue chip stocks are shares in large, well-established, and financially stable companies with a history of paying dividends and a reputation for solid growth.
12. Short Selling: Short selling is an investment strategy where an investor borrows shares of a stock and sells them with the intent of buying them back later at a lower price, aiming to profit from a decline in the stock's price.
13. Margin: Buying on margin is the practice of borrowing money from a broker to purchase securities. This allows an investor to purchase more shares than they could with their own cash, amplifying potential gains, but also increasing the potential risk of losses.