Random Walk Theory: Claims that a stock’s past price action is no guide to future prices because prices move randomly, not in a pattern. Random walk theoreticians would sneer at the idea that because a stock has been moving up during the last few weeks it is likely to continue moving up.

Rally: Considerable and sustained increase in the price of a security or value of a market. A brisk advance in the market following a decline in prices.

Real Asset: Asset whose value is linked (directly or indirectly) to inflation. Equities, property, forestry, venture capital, and inflation-linked bonds are often considered to be real assets.

Real Interest Rate: Interest rate adjusted for inflation. If the nominal interest rate is 6% and inflation is expected to be 2% then the real interest rate is 4%. The definitions of real yield, the real rate of return, etc., are similar.

Real-Time Gross Settlement (RTGS): Concept designed to achieve sound risk management in the settlement of interbank payments. Transactions are settled across accounts held at the Central Bank on a continuous gross basis where settlement is immediate, final, and irrevocable.

Reaction: A temporary decline in the market following an advance in prices.

Rebalancing: Making adjustments to a portfolio to counteract the fact that different assets have performed differently over a period, and thus comprise different percentages of the portfolio than originally intended.

Record Date: A date on which the records of a company are closed for the purpose of determining the stockholders to whom dividends, proxies rights, etc., are to be sent.

Red Herring: A preliminary prospectus was filed with the Securities and Exchange Commission in the United States in order to test the market’s reaction to a proposed new issue of securities. In the Indian scenario, Red Herring is a draft prospectus that is used in book-built issues. It contains all disclosures except the price and is used for testing the market reaction to the proposed issue

Recession: Fall in the country’s economic activity, for at least two consecutive quarters, not as serious as depression.

Recovery Stock: A share that has fallen in price, but which has the potential to rise again to the previous level.

Reflation: An expansion of the economy characterized by rising unemployment and increased production as a result of the government’s economic policy.

Registrar of Companies: An official appointed by the Government of India to scrutinize the “Memorandum of Association” and the ‘Articles of Association’ which the promoters of the company draft and submit to him. If he finds these in order, he will give his approval to the formation of the company through a ‘Certificate of Incorporation.’  The Registrar keeps all the documents of a company formed under the Companies Act, 1956 and any subsequent amendments to a company’s rules have to be notified to the approval by him.

Redemption: Repayment of an investor’s principal in a security, such as a bond, at or prior to maturity.

Redemption Price: The price at which a bond is redeemed or paid.

Redemption Yield: Calculation of the return that an investor will earn on a bond if he or she holds it to redemption, taking into account income and any capital gain or loss that will be made at the maturity date.

Rehypothecation: Means by which a prime broker gains access to bank loans. The prime broker’s clients (predominantly hedge funds) are required to post collateral with the prime broker for services such as securities lending or leveraged investment transactions. Rehypothecation occurs when the prime broker subsequently reuses the collateral that was originally posted by its client(s) to obtain a loan itself from a bank.

Relative Return: Asset’s or portfolio’s return over a period of time relative to that of a chosen benchmark. Calculated as the difference between the asset’s absolute return and the benchmark’s performance.

Relative Strength: A comparison of the performance of two items, such as an individual stock or group of stocks and the overall market. Relative strength analysis helps people select stocks that are likely to outperform the overall market.

Reinvestment: Using the dividends, interest, or profits from investment to buy more of that investment.

REIT (Real Estate Investment Trust): Particular type of pooled fund that invests in the property sector.

Rematerialisation: The process of converting electronic holdings into physical securities through a Depository Participant.

Responsible Investment: Integration of Environmental, Social, and Corporate Governance (ESG) considerations into investment management processes and ownership practices in the belief that those factors can have an impact on financial performance.

Resistance Level: The price at which sellers tend to sell in sufficient volume to lower the price of a security. For example, if, on a few occasions, the price of a given stock has risen to around Rs 300 per share and, on each occasion, the price subsequently drops, a technical analyst would consider Rs 300 per share to be the resistance level for that stock.

Retail Fund: Assets managed on behalf of the direct public in the form of a pooled fund.

Retained Earnings: Company earnings that are not paid out as dividends.

Return: Increase in value of an investment over a period of time, expressed as a percentage of the value of the investment at the start of the period.

Return On Equity (ROE): Company earnings divided by shareholders’ funds. Provides an indication to shareholders of how effectively their money is being used by the company.

Repurchase Agreement (Repo): A financing arrangement used primarily in the government securities market whereby a dealer or other holder of government securities sells the securities to a lender and agrees to repurchase them at an agreed future date at an agreed price which will provide the lender an extremely low-risk return. Repos are popular because they can virtually eliminate credit problems. The repo market is enlarged and enhanced by its use in federal board open market operations in the United States. Repos operate slightly differently in other markets.

Repurchase Price: The price or net asset value at which an open-ended scheme purchases or redeems its units from the unitholders. It may include exit load, if applicable.

Reverse Book Building: Reverse book building is similar to the process of book building, which is aimed at securing the optimum price for a company’s share. In reverse book building, the investors’ aim is to sell the shares to exit the company.

Reverse Repo: The purchase of securities with an agreement to resell them at a higher price at a specific future date. This is essentially just a loan of the security at a specific rate. Also called reverse repurchase agreement.

Ring-Fencing: Act of separating investors’ assets from those assets used to determine an investment bank’s net value. The ring-fenced assets are usually held in separate offshore accounts and are therefore protected from claims by creditors of the investment bank in the event of the bank’s failure.

Registered Bonds: A bond is registered in the books of the company in the name of the owner.

Rigged Market: Manipulation of share price to attract buyers and sellers to the rigger's advantage.

Rights Issue/ Rights Shares: The issue of new securities to existing shareholders in a fixed ratio to those already held.

Rolling Settlement: The practice on many stock markets of settling a transaction a fixed number of days after the trade is agreed.

Rising Bottoms: A technical chart pattern that shows a rising trend in the low prices of shares in successive curves of high and low.  If this trend is accompanied by a rising trend in the tops in successive curves of highs, the trend is interpreted to be bullish.

Risk: (a) Likelihood of a return different from that expected and the possible extent of the difference. The downside risk is the likelihood of a loss, or a return less than expected on an investment. (b) Also used to indicate the volatility of different assets.

Risk and Return: A important concept in investment that must take into account is risk aversion, which is a common enough human trait.  In investment generally speaking the less the risk, the lower the return. The absolute risk is the insolvency of the borrower or the company whose shares have been bought.

Risk-Adjusted Return: Any measure of the return earned by an investment that is adjusted to take into account the level of risk taken to achieve it.

Risk Averse: Preference of an individual or entity for avoiding risk, however, defined. In terms of returns, a risk-averse investor would seek a less volatile return unless he or she were adequately compensated for the risk.

Risk-Free Rate of Return: Yield on a riskless investment (generally one that has a government-backed guarantee and a known rate of return). For example, the yield on government-issued three-month security is often taken as a measure of the three-month risk-free return against which other riskier assets are measured. risk premium Additional return relative to the risk-free return expected from a risky asset to compensate for the additional risk.

Risk/Return Trade-off: Amount of expected return that must be sacrificed in order to reduce risk.

Risk Tolerance: The extent to which an investor is prepared to accept volatility or risk in a portfolio.

Rolling Period Returns: Annualised returns over a given period ending with the date stated. This allows investors to compare the returns achieved over a specified period of time leading up to various dates over the holding period of their investments.

Run: A run involves a person creating activity in security by successively buying or selling that security. The intention is that the increased activity would, in the case where the person is buying, attract others to buy and push up the price. At that point, those organizing the run would then attempt to sell out at a financial gain. This is sometimes known as “pumping and dumping.”

Running Yield: Annual income on an investment divided by its current market value, for example, the dividend yield on equities.

Stock Market Reference (A-Z)


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