R-Squared
What is 'R-Squared' R-squared is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. For example, an R-squared for a fixed-income security versus the Barclays Aggregate Index identifies the security's proportion of variance that is predictable from the variance of the Barclays Aggregate...
X-Efficiency
What is 'X-Efficiency' X-efficiency is the degree of efficiency maintained by individuals and firms under conditions of imperfect competition. According to the neoclassical theory of economics, under perfect competition individuals and firms must maximize efficiency in order to succeed and make a profit; those who do not will fail and be forced to exit the market. However,...
PPP
Quick Facts The PPP is Purchasing Power Parity Purchasing power parity is used by macro-economic analysts to compare different countries' currencies through a "basket of goods" method. Purchasing power parity allows us to compare standard of living and economic productivity between nations. Some nations change their GDP to account for PPP/ Further Reading Critical success factors...
Zero Balance Account (ZBA)
What is a 'Zero Balance Account - ZBA' A zero balance account (ZBA) is a checking account in which a balance of zero is maintained by automatically transferring funds from a master account in an amount only large enough to cover checks presented. A ZBA is used by corporations to eliminate excess balances in separate accounts and...
Half-Life
What is 'Half-Life' Half-life represents a date in the future when half of the total principal of a mortgage-backed security (MBS) will be paid off. It can also represent the date when half of a person's private mortgage principal is paid off. While an estimate can be made as to what the half-life will be, it is...
Tactical Asset Allocation (TAA)
What is 'Tactical Asset Allocation - TAA' Tactical asset allocation is an active management portfolio strategy that shifts the percentage of assets held in various categories to take advantage of market pricing anomalies or strong market sectors. Explaining 'Tactical Asset Allocation - TAA' To understand tactical asset allocation, one must first understand strategic asset allocation....
Creative Destruction In Economics
Creative destruction, sometimes called Schumpeter's gale, is an idea people studying economics theory say may lead to innovation in the business cycle. Karl Marx argued the devaluation of wealth in periods when capitalism is going through a financial crisis is an inevitable outcome of its wealth creation processes. During the 1950s, the Austrian economist Joseph Schumpeter built on and...
M0
What is 'M0' M0 is a measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. In the United Kingdom, the M0 supply is also referred to as narrow money. Explaining 'M0' M0 (M-zero) is the most...
M1 – Money Supply
The money supply has different components and M1 is the measure of the component that includes the physical money held by public. It is the asset individuals or businesses can directly use for investment or for making payments of any kind. M1 includes coins, currency, NOW, checking amounts, and assets that can be quickly converted into physical money. It...
Tag-Along Rights
What are 'Tag-Along Rights' Tag-along rights, also referred to as "co-sale rights," are contractual obligations used to protect a minority shareholder, usually in a venture capital deal. If a majority shareholder sells his take, it gives the minority shareholder the right to join the transaction and sell his minority stake in the company. Tag-alongs effectively oblige the...