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Earned Income
Income that is designated by Canada Revenue Agency for RRSP calculations. Most types of revenues are included with the exception of any form of investment income and pension income.

Earnings or Income Statement
A financial statement which shows a company's revenues and expenditures resulting in either a profit or a loss during a financial period.

Earnings Per Share (EPS)
A value ratio that shows the portion of net income for a period attributable to a single common share of a company. For example, a company with $100 million in earnings and with 100 million common shareholders would report an EPS of $1 per share.

Economic Indicators
Statistics or data series that are used to analyze business conditions and current economic activity. See also leading, lagging, and coincident indicators.

Economies of Scale
An economic principle whereby the per unit cost of producing each unit of output falls as the volume of production increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

Efficient Market Hypothesis
The theory that a stock's price reflects all available information and reflects its true value.

Election Period
When an investor purchases an extendible or retractable bond, they have a time period in which to notify the company if they want to exercise the option.

Elliot Wave Theory
A theory used in technical analysis based on the rhythms found in nature. The theory states that there are repetitive, predictable sequences of numbers and cycles found in nature similar to patterns of stock movements.

Embedded Option
A term used to describe the convertible, retractable or extendible features of some securities. These features can often be valued using the same techniques used to value options.

Emerging Industries
Brand new industries in the early stages of growth. Often considered as speculative because they are introducing new products that may or may not be accepted and may face strong competition from other new entrants.

Enterprise Multiple (EM)
A ratio used to measure a company's overall value by comparing its enterprise value to its earnings before interest, taxes and amortization or EBITDA.

Enterprise Value (EV)
Reflects what it would cost to purchase a company as a whole. EV is calculated as the market value of the company's common equity, preferred equity and debt less any cash or investments that it records on its balance sheet.

Equilibrium Price
The price at which the quantity demanded equals the quantity supplied.

Equipment Trust Certificate
A type of debt security that was historically used to finance "rolling stock" or railway boxcars. The cars were the collateral behind the issue and when the issue was paid down the cars reverted to the issuer. In recent times, equipment trusts are used as a method of financing containers for the offshore industry. A security, more common in the U.S. than in Canada.

Equity
Ownership interest in a corporation's stock that represents a claim on its earnings and assets. See also Stock.

Equity Dividend Shares
Shares that trade like bonds and preferred shares, but can benefit from increases in dividends paid on the underlying common shares. Also known as structured preferreds. See also Split Shares.

Equity Income
A company's share of an unconsolidated subsidiary's earnings. The equity accounting method is used when a company owns 20% to 50% of a subsidiary.

Equity Method
An accounting method used to determine income derived from a company's investment in another company over which it exerts significant influence.

Escrowed or Pooled Shares
Outstanding shares of a company which, while entitled to vote and receive dividends, may not be bought or sold unless special approval is obtained. Mining and oil companies commonly use this technique when treasury shares are issued for new properties. Shares can be released from escrow (i.e., freed to be bought and sold) only with the permission of applicable authorities such as a stock exchange and/or securities commission.

Eurobonds
Bonds that are issued and sold outside a domestic market and typically denominated in a currency other than that of the domestic market. For example, a bond denominated in Canadian dollars and issued in Germany would be classified as a Eurobond.

European Option
An option that can only be exercised on a specified date – normally the business day prior to expiration.

Event-Driven Hedge Funds
A type of hedge fund that seeks to profit from unique events such as mergers, acquisitions, stock splits or buybacks.

Ex-Ante
A projection of expected returns – what investors expect to realize as a return.

Exchange Fund Account
A special federal government account operated by the Bank of Canada to hold and conduct transactions in Canada's foreign exchange reserves on instructions from the Minister of Finance.

Exchange Rate
The price at which one currency exchanges for another.

Exchange-Traded Funds (ETFs)
Open-ended mutual fund trusts that hold the same stocks in the same proportion as those included in a specific stock index. Shares of an exchange-traded fund trade on major stock exchanges. Like index mutual funds, ETFs are designed to mimic the performance of a specified index by investing in the constituent companies included in that index. Like the stocks in which they invest, shares can be traded throughout the trading day.

Ex-Dividend
A term that denotes that when a person purchases a common or preferred share, they are not entitled to the dividend payment. Shares go ex-dividend two business days prior to the shareholder record date. See also Cum Dividend.

Exempt List
Large professional buyers of securities, mostly financial institutions, that are offered a portion of a new issue by one member of the banking group on behalf of the whole syndicate. The term exempt indicates that this group of investors is exempt from receiving a prospectus on a new issue as they are considered to be sophisticated and knowledgeable.

Exempt Market
An unregulated market for sophisticated participants in government bonds, corporate issues, commercial paper, and other structured products. A prospectus has not been required to raise money privately from private investors (largely institutions, but also individuals) and registration with a securities commission for those so dealing has not been needed.

Exercise
The process of invoking the rights of the option or warrant contract. It is the holder of the option who exercises his or her rights. See also Assignment.

Exercise Notice
The instructions tendered by the option holder, through the investment dealer, which states the holder's decision to activate the rights given in the option contract. Once tendered, it is irrevocable. The holder of a call will buy the underlying security while the holder of a put will sell the underlying security.

Exercise Price
The price at which a derivative can be exchanged for a share of the underlying security (also known as subscription price). For an option, it is the price at which the underlying security can be purchased, in the case of a call, or sold, in the case of a put, by the option holder. Synonymous with strike price.

Expansion
A phase of the business cycle characterized by increasing corporate profits and hence increasing share prices, an increase in the demand for capital for business expansion, and hence an increase in interest rates.

Expectations Theory
A theory stating that the yield curve is shaped by a market consensus about future interest rates.

Expiration Date
The date on which certain rights or option contracts cease to exist. For equity options, this date is usually the Saturday following the third Friday of the month listed in the contract. This term can also be used to describe the day on which warrants and rights cease to exist.

Ex-Post
The rate of return that was actually received. This historic data is used to measure actual performance.

Ex-Rights
A term that denotes that the purchaser of a common share would not be entitled to a rights offering. Common shares go ex-rights two business days prior to the shareholder of record date.

Extendible Bond or Debenture
A bond or debenture with terms granting the holder the option to extend the maturity date by a specified number of years.

Extension Date
For extendible bonds the maturity date of the bond can be extended so that the bond changes from a short-term bond to a longterm bond.

Extraordinary Items
An event not typical of normal business activity and do not occur on a regular basis. For example, a company may write off an underperforming division or it may sell a large amount of real estate in a given fiscal year. The results of these special gains or losses are included as an extraordinary item on the earnings statement.