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EAFE Index

A stock index of European, Asian, and Far Eastern stocks that is maintained by Morgan Stanley.

Early Withdrawal Penalty

An economic penalty that is assessed when an investor withdraws assets from an investment or brokerage account. For example, Certificates of Deposit have penalties for early withdrawal.

Earnings

The net income that is produced by a company.

Earning Per Share (EPS)

The net income of a company divided by the number of outstanding shares of the company's stock. A frequently used benchmark for evaluating the relative price of stocks.

Earnings Per Share Momentum

An increase in the earnings per share growth rate from one reporting period to the next.

Earnings Surprises

Positive or negative differences between analysts' earnings forecasts and the actual earnings produced by a company.

Economic Growth Rate

The annual percentage rate change in the Gross National Product.

Economic Indicators

Quantitative information that indicates the strength or weakness of the U.S. economy. Also, used to measure trends that help determine the economy's future performance.

Economies of Scale

The decrease in the marginal cost of production as a company expands the rate of sale for a product.

Edgar Online

A pay-to-view web site that contains filings of documents for public corporations.

Effective Rate

A measure of the time value of money that reflects the impact of compounding.

Efficient Frontier

Different combinations of securities in portfolios that have various risks and return relationships. The efficient frontier produces the maximum return for a given level of risk exposure.

Efficient Market Theory

Everything that can be known about a stock is known and the information is reflected in the current price of the stock. Therefore, all stocks are priced fairly in relation to each other.

Efficient Portfolio

A portfolio of securities that produces the maximum amount of return based on the amount of risk exposure.

Elliot Wave Theory

A timing strategy that predicts future price movement of markets and securities based on their historical movement and the psychology of investors.

Emerging Markets

The financial markets of developing (less industrialized) countries.

Employee Retirement Income Security Act (ERISA)

Passed in 1974, a federal law that governs the establishment and operation of private pension plans in the U.S.

Endowment

Gift of money or property to an institution for a specified purpose.

Enhanced Indexing

An indexing strategy that uses refinements to exceed the performance of the index by small margins. For example, an index fund manager may select stocks that produce higher income to increase the income return of the fund versus the index.

Enterprise Value

The stock market valuation of a company that is found by multiplying the company's outstanding shares by current share price, less cash, plus current debt.

Equity

An ownership interest in a company. Stocks are a form of equity ownership. Some financial advisors refer to stocks as equities. The equity market is the same as the stock market.

Estate Tax

A federal tax that is imposed on an individual's assets when they are distributed to heirs.

Euro

The name for the common currency of most European countries.

Exchange Traded Fund (ETF)

A form of mutual fund that trades on an exchange as a security and invests in a combination of securities that replicate the performance of an index.

Ex-dividend

The buyer of shares, when they are quoted ex-dividend, is not entitled to the next dividend that is paid by the issuer of the security.

Execution

The process of completing the purchase or sale of a security.