Chapter 8

dividend growth model

a model that determines the current price of a stock as its dividend next period divided by the discounted rate less the dividend growth rate

straight voting

a procedure in which a shareholder may cast all votes for each member of the board of directors

cumulative voting

a procedure in which a shareholder may cast all votes for one member of the board of directors

dividend yield

a stock's expected cash dividend divided by its current price

member

the owner of a trading license on the NYSE

dividends

payments by a corporation to shareholders, made in either cash or stock

over-the-counter OTC market

securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories

preferred stock

stock with divident priority over common stock, normally with a fixed dividend rate, sometimes without voting rights

capital gains yield

the dividend growth rate, or the rate at which the value of an investment grows

order flow

the flow of customer orders to buy and sell securities

inside quotes

the highest bid quotes and lowest ask quotes offered by dealers for a security

primary market

the market in which new securities are originally sold to investors

secondary market

the market in which previously issued securities are traded among investors

commission brokers

NYSE members who execute customer orders to buy and sell stock transmitted to the exchange floor

floor brokers

NYSE members who execute orders for commission brokers on a fee basis; somtimes called $2 brokers

floor traders

NYSE members who trade for their own accounts, trying to anticipate temporary price fluctuations

broker

an agent who arranges security transactions among investors

dealer

an agent who buys and sells securities from inventory

SuperDOT system

an electronic NYSE system allowing orders to be transmitted directly to the specialist

common stock

equity without priority for dividends or in bankruptcy

specialist

a NYSE member acting as a dealer in a small number of securities on the exchange floor; often called a market maker

specialists post

a fixed place on the exchange floor where the specialist operates

proxy

a grant of authority by a shareholder allowing another individual to vote his or her shares

electronic communications network (ECN)

a web site that allows investors to trade directly with each other