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Part 1

Part 1

1.Bulls are those who believe prices—of individual securities or the overall market—are headed higher, while bears are those who look for lower prices. Dogs are securities that have performed poorly in comparison to others. Dinosaurs are certain companies in mature industries. Spiders are a phonetic representation of SPDRs (Standard & Poor’s Depositary Receipts), American Stock Exchange–listed securities designed to track moves in the well-known market index. Sharks are aggressive market operators who capitalize on the naivet of less-experienced investors.
2.Broadly describing the widespread shift towards—and enthusiasm for—electronic commerce on the Internet, this expression literally refers to the “.com’ appendage found on the end of the addresses of most commercially oriented Web sites.
3.This term was made famous by Alan Greenspan, long-serving Chairman of the Federal Reserve Board of Governors, during a 1996 speech that questioned whether investors had unduly boosted share values without regard to any of the potential downside risks. It was later the subject (and title) of a popular business book by Robert J. Shiller.
4.Block trades are transactions of 10,000 shares or more.
5.This is calculated by multiplying the market price of a stock by the total number of shares outstanding.
6.Joshua D. Coval, David A. Hirshleifer, and Tyler G. Shumway, “Can Individual Investors Beat the Market?” Harvard NOM Working Paper No. 02-45, Jan. 6, 2003, http://ssrn.com/abstract=364000.
7.The Securities and Exchange Commission ordered this in response to pressure from the U.S. Justice Department.
8.ECNs are “virtual” marketplaces where buyers and sellers can display, match, and execute orders. CNs are order-matching systems designed to help buy-side institutions efficiently balance offsetting supply and demand needs.
9.Mandated by Congress and ordered by the SEC in August 2000, the change from fractional increments to cents helped to narrow the spread between “bids” (what “displayed” buyers are prepared to pay) and “offers” (what sellers are willing to accept), effectively reducing trading costs.
10.Energetic options trading reportedly took place in Holland during the Tulipmania of the 1600s, while Chinese rice dealers are known to have hedged their exposure with futures in the eighteenth century.
11.This change was stoked in large measure by the explosive growth of “cash-poor” TMT start-ups and the enthusiastic granting of incentive stock options by a wide variety of publicly traded corporations.
12.Starting in 2001, the Federal Reserve embarked on an aggressive course of monetary stimulus, featuring multiple cuts in short-term interest rates, intended to keep the faltering U.S. economy afloat.
13.As an interesting aside, one recent study provides additional support for previous research showing greater risk-taking behavior among young managers. See Nicole M. Boyson, “Do Hedge Funds Exhibit Performance Persistence? A New Approach,” Oct. 2003, http://www.mgmt.purdue.edu/faculty/nboyson/persistence.pdf.
14.Jack Willoughby, “Happy Trails: Stocks Are Heading Higher, Portfolio Managers Say,” Barron’s, Oct. 27, 2003.
15.Markus K. Brunnermeier and Stefan Nagel, “Hedge Funds and the Technology Bubble,” Journal of Finance, forthcoming, http://www.princeton.edu/~markus/research/papers/hedgefunds_bubble.pdf.
16.Amid suggestions by “futurists” such as Alvin Toffler that the limits on human processing power may have already been reached.
17.Through “fund of funds” or pooled investment programs and other means.
18.Sales-traders are specialized sales representatives who have traditionally provided trading and advisory support directly to buy-side equity dealing desks.
19.Market-makers are sell-side traders who have authority to make prices and commit resources to buy and sell securities with their firm’s clients and other authorized counterparties.
20.This classic market theory revolves around the idea that an imprudent purchaser will eventually be able to offload a questionable investment on another foolish buyer at a higher price.
21.They had only been allowed to do this because of rule changes triggered by the Taxpayer Relief Act of 1997.
22.Chaos Theory is a method of analyzing complex systems first developed during the 1960s.
23.Regulation Fair Disclosure was put into effect by the SEC in October, 2000.
24.The Sarbanes-Oxley Act of 2002 was enacted by Congress in January of that year.



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