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R-squared is a statistical measurement that determines the proportion of a security's return, or the return on a specific portfolio of securities, that can be explained by variations in the stock market, as measured by a benchmark index.
For example, an r-squared of 0.08 shows that 80% of a security's return is the result of changes in the market - specifically that 80% of its gains are due to market gains and 80% of its losses are due to market losses. The other 20% are the result of factors particular to the security itself.
- Browse Related Terms: Consensus recommendation, index, Inflation rate, Overvaluation, R-squared, Real rate of return, Russell 1000 Index, Russell 2000 Index, screen, Standard deviation
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A rally is a significant short-term recovery in the price of a stock or commodity, or of a market in general, after a period of decline or sluggishness.
Stocks that make a particularly strong recovery in a particular sector or in the market as a whole are often said to be leading the rally, a reference to the term's origins in combat, where an officer would lead his rallying troops back into battle. While a rally may signal the beginning of a bull market, it doesn't necessarily do so.
- Browse Related Terms: Advance-decline (A-D) line, Advancer, Decliner, Gainer, Loser, Rally, Sell-off
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The random walk theory holds that it is futile to try to predict changes in stock prices.
Advocates of the theory base their assertion on the belief that stock prices react to information as it becomes known, and that, because of the randomness of this information, prices themselves change as randomly as the path of a wandering person's walk.
This theory stands in opposition to technical analysis, whose practitioners believe you can predict future stock behavior based on statistical patterns of prior performance.
- Browse Related Terms: Behavioral finance, Cornering the market, Monte Carlo simulation, Oversold, Random walk theory, Risk-adjusted performance, Sharpe ratio, Stochastic modeling, Technical analysis
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Ranking is a method of assigning a value to an investment in relation to comparable investments by using a scale.
The scale might be a straightforward numerical (1 to 5) or alphabetical (A to E) system, or one that also uses stars, checks, or some other icon to convey the evaluation.
Research firms and individual analysts typically establish and publish their criteria - though not their methodology - for establishing their rankings.
These criteria, which also differ by investment type, may include quantitative information such as past earnings, price trends, and the issuing company's financial fundamentals, or more qualitative assessments, such as the state of the marketplace.
Ranking can be a useful tool in evaluating potential investments or in reviewing your current portfolio. Before depending on a ranking, though, you'll want to understand how it has been derived and how accurate the system for assigning the values has been over time.
- Browse Related Terms: Bottom-up investing, Fundamental analysis, Good will, intrinsic value, Present value, Qualitative analysis, Quantitative analysis, Ranking
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The period of time that a mortgage company will guarantee a loan's interest rate, usually 30 or 60 days. Longer rate locks are sometimes available at higher costs.
State of Maine, Department of Professional and Financial Regulation - Cite This Source - This Definition- Browse Related Terms: Balloon Payment, Conventional Mortgage, Department of Veterans Affairs (VA), Federal Housing Authority (FHA), floating, Loan Term, Locking, Maine State Housing Authority (MSHA), Pest Inspection, Rate Lock, Rescission, Rural Development (RD), Underwriting
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Rate of return is income you collect on an investment expressed as a percentage of the investment's purchase price. With a common stock, the rate of return is dividend yield, or your annual dividend divided by the price you paid for the stock.
However, the term is also used to mean percentage return, which is a stock's total return - dividend plus change in value - divided by the investment amount.
With a bond, rate of return is the current yield, or your annual interest income divided by the price you paid for the bond. For example, if you paid $900 for a bond with a par value of $1,000 that pays 6% interest, your rate of return is $60 divided by $900, or 6.67%.
- Browse Related Terms: Average annual yield, Basis point, Current return, current yield, Equivalent taxable yield, Nominal yield, Rate of return, Spread, Yield, Yield to maturity (YTM)
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The price data take the form of a "rate spread." Lenders must report the spread (difference) between the annual percentage rate (APR) on a loan and the rate on Treasury securities of comparable maturity - but only for loans with spreads above designated thresholds. So rate spreads are reported for some, but not all, reported home loans. The rate spread, along with Lien Status and HOEPA help interpret the pricing data.
- Browse Related Terms: Collateral, creditor, Equity stripping, Home Equity Line of Credit (HELOC), Home Ownership and Equity Protection Act (HOEPA), interest, Interest rate, Loan modification activities, Principal, Rate Spread, Servicemen’s Readjustment Act, Truth-In-Lending Act (TILA)
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Rating means evaluating a company, security, or investment product to determine how well it meets a specific set of objective criteria.
For example, a bond issue may be rated along a spectrum from highest quality investment grade to junk, or from AAA to D.
Rating typically affects the interest rate a fixed-income security must pay to attract investors, forcing lower-rated bond issuers to pay higher rates. Other investors may shun low-rated investments entirely, unwilling to take the risk that the issuer might default. However, ratings are not infallible, even in industries, such as insurance, that are regularly scrutinized.
Rating differs from ranking, which assigns the relative standing of two or more similar items in relation to each other.
- Browse Related Terms: Bond fund, Bond rating, Currency, Duration, Fallen angel, Gold standard, High-yield bond, Investment grade, Junk bond, Moody's Investors Service, Inc., Rating, Rating service, Risk premium
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A rating service, such as A.M. Best, Moody's Investors Service, or Standard & Poor's, evaluates bond issuers to determine the level of risk they pose to would-be investors.
Though each rating service focuses on somewhat different criteria in making its evaluation, the assessments tend to agree on which investments pose the least default risk and which pose the most.
These rating services also evaluate insurance companies, including those offering fixed annuities and life insurance, in terms of how likely a provider is to meet its financial obligations to policyholders.
- Browse Related Terms: Bond fund, Bond rating, Currency, Duration, Fallen angel, Gold standard, High-yield bond, Investment grade, Junk bond, Moody's Investors Service, Inc., Rating, Rating service, Risk premium
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Typically includes residential property (e.g., homes, apartment buildings, hotels), commercial property (e.g., office buildings, business sites, shopping malls), and land held for agricultural use or mineral exploration (e.g., vacant lots are included if held for the production of income such as appreciation in value).
- Browse Related Terms: Blind pool, Hard assets, Hedge fund, Limited partner, Limited partnership, Passive income, Passive losses, Private equity, Real Estate, Venture capital (VC)
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Managed diversified portfolios of real estate and mortgages. REITs are usually publicly traded like mutual funds and qualify as excepted investment funds (EIF).
REITs are publicly traded companies that pool investors' capital to invest in a variety of real estate ventures, such as apartment and office buildings, shopping centers, medical facilities, industrial buildings, and hotels.
After an REIT has raised its investment capital, it trades on a stock market just as a closed-end mutual fund does.
There are three types of REITs: Equity REITs buy properties that produce income. Mortgage REITs invest in real estate loans. Hybrid REITs usually make both types of investments.
All three are income-producing investments, and by law 90% of a REIT's taxable income must be distributed to investors. That means the yields on REITs may be higher than on other equity investments.
- Browse Related Terms: Contrarian, equity fund, Global fund, Growth and income fund, income fund, International fund, Investment objective, Portfolio turnover, Prospectus, Real estate investment trust (REIT), Tax-efficient funds, Transparency, Turnover ratio, Value fund, Vulture fund, World fund
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Federal law that, among other things, requires lenders to provide "good faith" estimates of settlement costs and make other disclosures regarding the mortgage loan. RESPA also limits the amount of funds held in escrow for real estate taxes and insurance.
- Browse Related Terms: Closing Costs, Closing Statement, Deed, Escrow, Good faith estimate, Real Estate Settlement Procedures Act (RESPA), Refund, Satisfaction of mortgage, Settlement (or Closing) Costs, Settlement agent, Title, Title Insurance, Title Search
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Your real interest rate is the interest rate you earn on an investment minus the rate of inflation.
For example, if you're earning 6.25% on a bond, and the inflation rate is 2%, your real rate is 4.25%. That's enough higher than inflation to maintain your buying power and have some in reserve, which you could use to build your investment base.
But if the inflation rate were 5%, your real rate would be only 1.25%.
- Browse Related Terms: Accredited investor, Appreciation, Boiler room, Capital preservation, churning, Collectible, Financial pyramid, Formula investing, Haircut, Indexed annuity, Inflation-adjusted return, opportunity cost, Real interest rate, Risk, Risk Tolerance, Time value of money
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Real property is what's more commonly known as real estate, or realty.
A piece of real property includes the actual land as well as any buildings or other structures built on the land, the plant life, and anything that's permanently in the ground below it or the air above it. In that sense, real property is different from personal property, which you can move from place to place with you.
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Any right, title, interest and claim in and to real property owned by the grantor at the date of execution of the deed of trust or acquired thereafter by said grantor or his successors in interest. To fall under this definition, the real property must be (a) located within an incorporated city or village at the time of the transfer; (b) not exceed 80 acres regardless of location, but not used as agricultural land; or (c) not exceed 40 acres regardless or location or use.
- Browse Related Terms: agent, Beneficiary, Co-Homeowners, Deed, Default, Grantor, Negative Equity, Real property, Title, trust, trust deed, Trustee
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A real property tax is a local tax on the value of real estate. The property may be assessed at full value, which is presumably the price that the owner could sell it for in the current market, or using some other valuation method.
The taxing agency, such as a county, city, town, or village, sets a tax rate, which is multiplied by the assessed value of each property to determine the tax due on that property.
You may be able to deduct real property taxes on your federal income tax return, but large deductions for real estate taxes are one of the factors that may result in your owing the alternative minimum tax (AMT).
- Browse Related Terms: adjusted gross income (AGI), Alternative minimum tax (AMT), Deduction, Earned Income Credit (EIC), Exemption, Head of household, Modified adjusted gross income (MAGI), Real property tax, Tax credit
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You find the real rate of return on an investment by subtracting the rate of inflation from the nominal, or named, rate of return.
For example, if you have a return of 6% on a bond in a period when inflation is averaging 2%, your real rate of return is 4%. But if inflation were 4%, your real rate of return would be only 2%.
Finding real rate of return is generally a calculation you have to do on your own. It isn't provided in annual reports, prospectuses, or other publications that report investment performance.
- Browse Related Terms: Consensus recommendation, index, Inflation rate, Overvaluation, R-squared, Real rate of return, Russell 1000 Index, Russell 2000 Index, screen, Standard deviation
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When an event is reported as it happens - such as a quick jump in a stock's price or the constantly changing numbers on a market index - you are getting real-time information.
Traditionally, this type of information was available to the public with a 15- or 20-minute time delay or was reported only periodically by news services.
Because of the Internet and cable TV, however, more and more individual investors have access to real-time financial news. Knowing what's happening enables you and others to make buy and sell decisions based on the same information that institutional investors and financial services organizations are using.
Real time, when used in computer technology, means that there is an interactive program that collects data and reports results immediately. The alternative, called batch processing, occurs when data is collected, stored, and then reported later in the evening or the next day.
- Browse Related Terms: Bourse, Currency trading, Cyber Crime, NASDAQ, NASDAQ Stock Market, real time, Stock market, Wire house
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When you sell an investment for more than you paid, you have a realized gain.
For example, if you buy a stock for $20 a share and sell it for $35 a share, you have a realized gain of $15 a share. In contrast, if the price of the stock increases, and you don't sell, your gain is unrealized, or a paper profit.
Realizing your gains means you lock in any increase in value, which could potentially disappear if you continued to hold the investment.
But it also means you may owe tax on that profit when you sell unless the investment is tax exempt or you hold it in a tax-deferred or tax-free account. In a tax-deferred account, you can postpone paying the tax until you begin withdrawing from the account.
However, if taxes are due and you have owned the investment for more than a year when you sell, you pay tax at the long-term capital gains rate, which, for most types of investments, is lower than the rate at which you pay federal income tax on ordinary income.
- Browse Related Terms: Basis, Basis price, Capital Gain, Capital gains tax (CGT), Capital loss, Community property, Convertible hedge, Cost basis, Earnings, Fund family, Investment Income, Long-term capital gain (or loss), Paper profit (or loss), Phantom gains, Profit, Realized gain, Return, Return on investment, Sell short, Step-up in basis, Unrealized gain, Unrealized loss, Wash sale
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These fields identify why an application was denied. As many as three reasons may be reported. Recording reasons for denial is optional, except for institutions supervised by the Office of Thrift Supervision (OTS)* or the Office of the Comptroller of the Currency (OCC).
* Requirement of reporting reasons for denial for OTS only applies for years 2010 and prior.
- Browse Related Terms: Action Taken Date, Action Taken Type, Applicant Ethnicity, Applicant Race, Applicant Sex, Application Received Date, Co-applicant Ethnicity, Co-applicant Race, Co-applicant Sex, Good Faith Estimate (GFE), Gross Annual Income, Lien Status, Loan Application Number, Loan Application Register (LAR), Panel - HMDA Reporter Panel Listing, Reasons for Denial, Respondent Name, Transmittal Sheet (TS), Type of Purchaser
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When you recapture assets, you regain them, usually because of the provisions of a contract or legal precedent.
When a contract is involved, you may be entitled to recapture a percentage of the revenues from something you produce in addition to being paid the cost of producing it.
For example, a hotel developer might be entitled to recapture a portion of the hotel's profits. Most of the time, recapture works in your favor, but depending on the situation, it can also mean a financial loss.
A negative form of recapture occurs when the government makes you repay tax benefits that you've profited from in the past. For example, say that your divorce settlement calls for you to pay $150,000 to your ex-spouse over three years. If you pay all of the money in the first two years in order to qualify for a tax deduction, and pay nothing in the third year, the IRS may force you to recapture part of your deduction in the third year and pay taxes on it.
- Browse Related Terms: Business Day, Bylaws, Debt Elimination Scheme, Domicile, Incorporation, Limited liability company, Nonprofit, Recapture, sales tax, Sole proprietor, Tenancy-in-common