Knowledge cluster
Stocks & Equities
How shares of companies work: what a stock is, how it is valued, how it trades on an exchange, and the vocabulary used to describe equity markets.
Definition
Bear Market
A bear market is a decline of 20% or more from a recent peak in a broad market index. Since 1945 the average US bear market lasted about 13 months.
4 min read
Definition
Bull Market
A bull market is a sustained period of rising prices, commonly dated from a 20% rise off a low. Bulls have historically run far longer than bears.
3 min read
Definition
Dividend
A dividend is a payment a company makes to its shareholders, usually in cash and usually from profits. Not every company pays one, and no company is obliged to.
5 min read
Definition
Market Capitalization
Market capitalization is the total market value of a company's outstanding shares: share price multiplied by the number of shares. It is the standard yardstick for company size.
4 min read
Definition
Price-to-Earnings (P/E) Ratio
The price-to-earnings ratio compares a company's share price with its earnings per share, describing how many dollars investors currently pay for one dollar of annual profit.
4 min read
Definition
S&P 500
The S&P 500 is a stock index of about 500 of the largest US companies, weighted by market value. It is the most followed equity benchmark in the world.
4 min read
Definition
Short Selling
Short selling is selling borrowed shares in the hope of buying them back cheaper. Profits are capped, potential losses are not.
4 min read
Definition
Stock (Equity)
A stock is a security that represents partial ownership of a company. Owning shares entitles the holder to a slice of the company's assets and profits, proportional to the number of shares held.
6 min read