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Lagging Indicators: Market indicators show the general direction of the economy and confirm or deny the trend implied by the leading indicators or concurrent indicators.

Lame Duck: A member of the stock exchange who cannot meet his obligations. Also, a company in financial difficulties.

Letter of Credit: A letter from the buyer’s banker to the seller’s banker authorizing the payment of a certain sum of money at a certain date on the production of specified documents. Widely used in trade, especially foreign trade.

Laissez Faire: View that markets are efficient and government intervention in the economy should be minimized.

LIBOR - London Interbank Offer Rate: Often used as a basis for pricing Euro loans. LIBOR represents the interest rate at which first class banks in London are prepared to offer dollar deposits to other first class banks. There are a number of similar rates like HIBOR (Hong Kong Interbank Offer Rate); SIBOR (Singapore Interbank Offer Rate); TIBOR (Toronto Interbank Offer Rate).

Last In First Out - LIFO: An inventory cost accounting procedure in which the last item manufactured is assumed to be the first one sold by the company.

Lay Off: The sell-off by an issuer of any or all unsubscribed shares in a rights offering to the underwriters at the subscription price.

Leading Indicators: Market indicators that signal the state of the economy for the coming months.

Lead Manager: The merchant banker(s) associated with the issue and responsible for due diligence and other associated issue-related activities.

Legal Risk: The risk of loss because a law or regulation is applied in an unexpected way or because a contract cannot be enforced.

Leverage: The use of borrowed money to finance an investment.  The use of borrowed money to over-invest a portfolio magnifies both gains and losses. This may be achieved by derivative instruments. Also refers to the debt/equity ratio in a company’s balance sheet.

Leveraged Buyout: The purchase of shares usually by the management of a company using its own assets as collateral for loans provided by banks or insurance companies.

Liabilities: Financial obligations — for example, money owed to banks or future pension payments — that must be met to satisfy the contractual terms of the obligation. Liabilities may be time-based (i.e. payable at a specific time) or contingent upon the occurrence of a future event (e.g. retirement, death).

Limited Partnership (private equity): Structure typically used for private equity funds. Investors are limited partners.

Liquidation: The process of converting stocks into cash. Also means the dissolution of a company.

Liquidity: (a) Degree to which an asset or portfolio is easily marketable or turned into cash. The most liquid equity stocks are those of the large blue-chip companies quoted on the large international markets. Liquidity can be measured by considering trading volume relative to a company’s issued share capital. (b) The proportion of liquid assets such as cash and short-term instruments in a portfolio.

Liquidity Premium: Additional return required to compensate an investor for investment with lower liquidity than cash. Also known as the liquidity risk premium.

Liquidity Adjustment Facility (LAF): Under the scheme, repo auctions (for absorption of liquidity) and reverse repo auctions (for injection of liquidity) will be conducted on a daily basis (except Saturdays). It will be same-day transactions, with interest rates decided on a cut-off basis and derived from auctions on a uniform price basis.

Liquid Assets: Proportion of listed unit trusts or mutual fund portfolio that is kept in cash or easily encashable assets to meet any request for redemption.

Liquid Market: Market with a high degree of liquidity, often resulting from a large number of buyers and sellers. There can be large variations in the liquidity of different equity markets, with the most liquid being the large international markets — New York, Tokyo, and London.

Liquidity Risk: The risk that a solvent institution is temporarily unable to meet its monetary obligations.

Listed Company: A company that has any of its securities offered through an offer document listed on a recognized stock exchange and also includes Public Sector Undertakings whose securities are listed on a recognized stock exchange.

Listing: Formal admission of security into a public trading system.

Listing Agreement: An agreement that has to be entered into by companies when they seek listing for their shares on a Stock Exchange. Companies are called upon to keep the stock exchange fully informed of all corporate developments having a bearing on the market price of shares like dividends, rights, bonus shares, etc.

Load: A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A front-end load is charged at the time of purchase. A back-end load is charged at the time of sale.

Load Fund: A Load Fund is one that charges a percentage of Net Asset Value (NAV) for entry or exit.

Locked or Crossed Quotations (U.S): A temporary condition, normally associated with fast-moving, active markets, where the asking price of one market maker in a given security is the same or lower than the bid price of another market maker, thereby producing locked or crossed markets respectively.

Lock in Trade: A securities transaction in which all the terms and conditions to the transactions are irrevocably accepted by the buyer and seller.

Long Position: A position showing purchase or a greater number of purchases than sales in anticipation of a rise in prices. A long position can be closed out through the sale of an equivalent amount.

Long Bias: Long/short fund with a net long position and therefore positive exposure to an increase in the underlying market.

Long/Short Fund: Hedge fund comprising a mixture of long and short positions in the same asset class or market. The net market exposure could be long or short (see market-neutral fund). A subgroup of long/short funds, also known as extension strategies and 120/20 or 130/30 funds, where the fund short sells — for example, 20% of the total value of the fund — and uses the proceeds to increase the fund’s long position.

Limit Order: The client gives the stockbroker a price limit above which he cannot buy or below which he cannot sell. There will also be a time limit. In a sharply rising or falling market such an order may result in no buying or selling.

Line Charts: As distinguished from bar charts, which show everyday price movement, line charts simply connect successive days' closing prices.

Liquid Assets: Quick Assets.

Listed Company: A company that has a listing agreement with a stock exchange and whose shares are quoted at the exchange and which features in the official list of quotations. Apart from paying regular listing fees, the company has to fulfill certain requirements, such as minimum asset base and publication of specific financial information, both at the time of listing and periodically thereafter. If for failure to fulfill these obligations a company is delisted, its shares cannot be traded on the exchange and these become extremely difficult to trade.

Listed Shares: Shares of companies that are registered by a stock exchange for trading on its floor. They have a quotation on the official list of the stock exchange.

Long Term: In the context of holding period of investments or market trends, long term means a period of one year or more, medium-term between six and twelve months, and short term less than six months.

Lump Sum: Payment of a one-off amount as opposed to a series of periodic payments. Most pension funds allow members to take a lump sum on retirement in return for a reduced pension (a process sometimes called commutation).

Stock Market Reference (A-Z)

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