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	EAFE INDEX The Europe, Australasia and Far East Index from Morgan Stanley Capital International group. The Index is used as a benchmark for international equity portfolio managers. EARNED INCOME For tax purposes, loosely defined as the total of income from employment, self-employment, pensions and alimony. Losses from rentals and losses incurred in self-employment are deducted from these amounts. EARNINGS BEFORE INTEREST AND TAXES (EBIT) Same as Operating Income EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) One of the most common acronyms in corporate financial circles that refers to Earnings Before Interest, Taxes, Depreciation and Amortization. It is a key number when evaluating the value of a company because it indicates how much cash the company is taking in versus what it is paying out. EARNINGS MULTIPLIER Used for purposes of valuation, it estimates a company’s P/E ratio, adjusted for the current level of interest rates. EARNINGS PER SHARE (EPS) A value ratio that represents a company’s earnings in relation to each common share of that corporation. EARNINGS-PRICE RATIO (EPR) Also known as the "earnings yield," this ratio is a corporation's earnings per share divided by its current stock price. It is used to compare the attractiveness of stocks, bonds and money market instruments. EARNINGS REPORT A statement released quarterly or annually by a publicly traded corporation to show its earnings, expenses and net profits. This information is released to the public and the company’s shareholders. Also called income statement or profit and loss statement. EARNINGS STATEMENT A financial statement showing the income and expenses of a business over a period of time, which also outlines any profits or losses. EARNINGS SURPRISE An earnings report that shows unexpected gains or losses according to a common projection made by analysts. EARNINGS YIELD See Earnings-Price Ratio. EASY MONETARY POLICY A central bank (i.e. Bank of Canada) policy designed to stimulate the economy by cutting short term interest rates, making money less expensive to borrow. The effect of this is to increase the supply of money. EBIT See Earnings Before Interest and Taxes EBITDA See Earnings Before Interest, Taxes, Depreciation and Amortization. ECONOMETRICS The application of modelling techniques and mathematical analysis to explain the dynamics of the relationships between important economic forces such as: interest rates, capital, monetary and fiscal policies and labour. Its goal is to provide a quantitative correlation between two economic factors. e.g. the effect that interest rates may have on money supply. ECONOMIC ASSUMPTIONS The assumptions about future economic performance underlying the government's projections of its revenues, expenditures and deficit - such as assumptions about growth, interest rates and inflation. Economic assumptions help to determine the budget action needed to achieve deficit/ surplus targets. Overly optimistic assumptions can lead to missed fiscal targets and damaged credibility. Using prudent economic assumptions and taking sufficient fiscal action helps to ensure that deficit/surplus targets are met. ECONOMIC INDICATOR Economic statistics that give important clues to changing economic conditions. For example, changes in the Consumer Price Index provide an indication of the rate of price inflation of consumer goods and services while changes in Gross Domestic Product provide an indication of overall growth in output. ECONOMICS Simply put it is the study of the economy. More specifically, it studies how the two most basic forces of the economy, supply and demand, distribute scarce product and service resources. The discipline of economics is divided into two studies. The first examines the behavior of firms, consumers and the role of government and is known as microeconomics. The second looks at broader scoped factors like unemployment, inflation, industrial production, and the role of government and is called macroeconomics. ECONOMIC VALUE ADDED (EVA) Takes all earnings after taxes minus the opportunity cost of capital to determine how much more valuable a company has become during a given time period. ECONOMY The production and distribution of goods and services in any particular geographic jurisdiction - this could be municipal, provincial, national or global. ECONOMY OF SCALE The notion that an increase in quantity of production will almost certainly lead to a decrease in the cost of production per unit produced. ECONOMY OF SCOPE When the effect of performing multiple business functions proves more efficient, in terms of cost, than performing each business function independently. EDGAR The SEC's system of Electronic Data Gathering, Analysis and Retrieval, which is used by all public corporations for the transmission of all documents required by the SEC. These include annual and quarterly reports and disclosure filings. EFFECTIVE ANNUAL INTEREST RATE The actual annual interest rate that accrues, after taking into consideration the effects of compounding (when compounding occurs more frequently than once per year). EFFECTIVE TAX RATE The actual tax rate paid after accounting for all deductions, credits and other tax liabilities. It is represented as a percentage of taxable income. For instance, if taxable income is $50,000 and $15,000 is paid in taxes in that year, the effective tax rate is 30%. EFFICIENT FRONTIER The line on a risk-reward graph comprised of all portfolios providing the greatest expected return for a given level of risk. These portfolios are known as either an efficient portfolio, or an optimal portfolio. EFFICIENT MARKET HYPOTHESIS The theory that a stock's price reflects all available information and reflects its true value. EFFICIENT MARKET THEORY The (now discredited) theory that market prices are a reflection of the expectations and knowledge that all investors have access to. However, if this theory were to hold true it would mean that most investment strategies are no more effective than a coin toss. EFFICIENT PORTFOLIO A portfolio providing the greatest expected return for a given level of risk, also known as an optimal portfolio. EI See Employment Insurance ELLIOTT WAVE THEORY A technique introduced by Ralph Elliott that uses the fundamentals of technical analysis to help understand the cycles of the stock market. This theory claims that stock markets follow a pattern of eight waves. There are five waves up and three waves down, but following the last wave up the market will be higher than it is was during the first wave at the beginning. This is one of the main components of Elliott’s theory that the markets will be higher over time. EMBEDDED OPTION An option that is part of the structure of a bond, describing a convertible, retractable or extendible feature of that security. EMERGING MARKET The financial market of a developing country with a small market and a short operating history. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) A program established to encourage employees to buy stocks in the company in order to help sustain or revive its business. These programs normally give the employee ownership in the company in exchange for wage cuts or other concessions that would facilitate an environment where the company can be rescued. EMPLOYEE STOCK PURCHASE PLAN (ESPP) A plan established by a company that permits employees to buy company stock, usually at a discount. EMPLOYMENT COST INDEX Used to measure the relative changes in wages, benefits, and bonuses for a specific group of occupations. It is an Index to monitor inflation. EMPLOYMENT INSURANCE (EI) Employment Insurance consists of a two-part reemployment system providing temporary support for claimants while they look for work. The insurance also provides active Re-Employment Benefits and Support Measures. ENTERPRISE VALUE A measure of what the market believes a company's ongoing operations are worth based on what the market is saying. It is a calculation equal to a company's market capitalization plus debt and preferred stock minus cash and cash equivalents. EPR See Earnings-Price Ratio EPS See Earnings Per Share EQUITY Having ownership interest in a corporation through obtaining common and/or preferred shares. EQUITY FUND An investment fund whose portfolio consists primarily of common and preferred shares. EQUITY LINKED NOTE A debt instrument whose return on investment is tied to the equity markets. These securities are usually protected from negative performances by guaranteeing a minimum redemption value. EQUITY RISK PREMIUM The additional return that either the stock market or a particular stock must provide over and above the rate on Treasury Bills to compensate for market risk. ESCROW Real estate, money, or securities deposited with a neutral third party (the escrow agent) to be delivered once certain conditions within a written agreement between both parties are met. ESOP See Employee Stock Ownership Plan ESPP See Employee Stock Purchase Plan ESTATE All assets owned by an individual at the time of death. The estate includes all funds, personal effects, interests in business enterprises, titles to property, real estate and chattels, and evidence of ownership, such as stocks, bonds, and mortgages owned and notes receivable. ESTATE FREEZING This is a planning strategy used to minimize taxes due at death. Some techniques of the strategy involve locking in the value of an asset at a point in time, thereby passing the future growth to the next generation. ESTATE PLANNING The process of providing for the orderly transfer of all of an individual's assets at death efficiently and, as per the individual’s wishes. ETHICAL INVESTING Investment in a manner that provides benefits to those with sensitivities to contemporary issues of today’s society. This type of investing normally allocates investments into companies that operate ethically, provide social benefits and are sensitive to the environment. For example, this type of investing may have a portion of its portfolio in companies who manufacture products that are not tested on animals. EUROBOND A bond denominated in Canadian dollars or some other currency, but issued and traded outside the country whose currency it is denominated in, usually a bond issued by a non-European company for sale in Europe. Also called a global bond. EURO CLEAR A clearing system for Eurobonds. EUROPEAN-STYLE OPTION An option which can only be exercised on a specific date just prior to its expiration, usually one business day before the expiry. Also called a European option. EVA See Economic Value Added. EVENT RISK The effect that an event such as acquiring additional debt or a recapitalization will have on the rating of a company’s bond. EXCESS CAPACITY This term refers to the amount of available plant and equipment not in use. When producers have spare capacity, they tend to reduce prices or minimize price increases in order to boost sales. Thus, the greater the excess capacity, the greater the downward pressure on the inflation rate. EXCHANGE A public market for the buying and selling of securities and their derivatives. In Canada, the major exchange is the S&P/TSX comprised of: the Toronto Stock Exchange (TSE), the Montreal Stock Exchange (MSE) and the Canadian Venture Stock Exchange (CDNX). The latter Exchange was a result of the consolidation of the Vancouver Stock Exchange and the Alberta Stock Exchange. EXCHANGEABLE PREFERRED SHARES A security enabling the holder to convert the security to a fixed number of common shares and is callable at the issuer's option. The conversion ratio varies from security to security. The terms of conversion are set forth in the security’s indenture. EXCHANGE-TRADED FUNDS (ETF) These are trusts that are composed of a portfolio of stocks or bonds usually mirrored after an index of the same proportion. This is traded on a major stock exchange unlike mutual funds. EXCHANGE RATE The price that one national currency can be converted into another country’s currency. The exchange rate depends on the supply of money, which is normally affected by many factors including Federal monetary policies, interest rate differences between nations, relative inflation, competitive export policies, economic growth, national deficits and debt. The Canadian dollar exchange rate is often stated in terms of the U.S. dollar price of one Canadian dollar. And like most developed countries, Canada functions with a "floating" exchange rate, meaning that the price of a currency fluctuates according to market conditions, as opposed to being "fixed" by the nation’s policymakers. EXCHANGE RATE RISK The risk that a business will be negatively affected by changes in currency exchange rates. EXCHANGE RATIO The number of shares that a shareholder will get for each share by a company acquiring the in shares as at the close of an acquisition of the company. EXCISE TAX A tax imposed on non-essential commodities and services by Federal or provincial governments. It is a type of "hidden" tax that is levied on consumer products such as tobacco and alcohol. EX-DIVIDEND OR RIGHTS This is a term used to describe an equity investment that at the time that it is traded, the next dividend payment or defined rights belong to the seller of the investment. EX-DIVIDEND DATE The first day of the ex-dividend period, which is usually the fourth business day before dividends are normally paid out to shareholders. Also known as the reinvestment date. EXECUTOR/EXECUTRIX An individual who has the authority to distribute an estate according to the instructions of the estate owners will. EXERCISE PRICE In options trading, the exercise price is the specified price for the investment instrument underlying a call or put. If options are exercised, the underlying securities are traded at this exercise price. This is also known as the strike price. EXPECTATIONS THEORY A theory stating that the yield curve is shaped by a market consensus regarding future interest rates. EXPENSE RATIO The percentage of a fund’s assets (per share) paid for operating expenses, including management fees, administrative fees and all other costs incurred by the fund in the latest fiscal year, except brokerage costs. Fund expenses are reflected in the funds NAV. Sales charges are not included in the expense ratio. EXPONENTIAL MOVING AVERAGE A moving average calculated by weighting recent values more heavily than older values. EXTRAORDINARY ITEMS A non-recurring event that materially affects a company's finances in a reporting period. These items are not typical of normal business activities and may include events such as company acquisitions or the unexpected sale of property. EXTRATERRITORIALITY The application of national laws, policies and practices beyond the frontier. The United States actively practices the extraterritorial application of its laws, e.g., in the area of antitrust and strategic export controls through its influences over the head offices of US-owned multinational enterprises.