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Finance GlossaryBasing
Basing
Definition of Basing
Basing happens when a security trades sideways after prolonged periods of falling prices.
As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.
This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.
As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.
This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.
Related Terms
P/E Growth Ratio (PEG)
The Price to Earnings Growth (PEG) Ratio is an extension of the traditional P/E ratio, which takes into account the expected earnings growth rate. It is popular in the Indian market for evaluating equity growth stocks. The formula is: PEG Ratio = P/E Ratio/Annual EPS Growth Rate. A PEG ratio of 1 or less is often seen as an indicator that a stock is fairly valued or undervalued relative to the expected growth rate of the stock. A lower PEG implies a better value proposition because investors are paying less for every unit of future earnings growth.
Reverse Stock Split
A reverse stock split is a corporate action that involves a company reducing the number of outstanding shares it has, while the stock price increases proportionately. For instance, if there is a 1:5 reverse split, five shares are combined into one. A reverse stock split does not change the value of a company. However, it is often used to meet the requirements of listing on an exchange or improve the perception in the market.
Pump and Dump
Pump and dump is a type of stock market manipulation. It involves artificially inflating the price of a stock (the pump) through false positive statements, often via social media or email spam, and then selling the cheaply acquired stock (the dump) once the price has increased because of the resulting buying frenzy. Common in Indian penny stocks with poor liquidity. SEBI actively monitors and penalises these manipulations. Investors should avoid tips and conduct their own independent research before making investment decisions.
Diversification
Diversification is the act of investing in more than one asset class, sector, industry, or country to mitigate risk. It is an investment strategy designed to reduce risk by pairing a volatile asset class like equities with a fixed income asset class like fixed deposits. Or, by investing in equities in one country and complementing it by investing a portfolio in stocks from another country.
Balance Sheet
A balance sheet is a financial statement that reveals a company’s assets, liabilities, and shareholders’ equity. It can help current and potential investors understand the financial health of a company.
These are some of the key components of a balance sheet:
These are some of the key components of a balance sheet:
- Current assets : Cash & cash equivalents, marketable securities, accounts receivable, inventories, prepaid expenses, and other liquid assets
- Fixed assets : Property, equipment, furniture, machinery, software, and other intangible assets
- Current liabilities : Short-term debt, unearned revenue, accounts payable, other accrued expenses & liabilities
- Long Term liabilities : Long-term loans, bonds, and others
- Shareholders’ equity : Paid-in capital and retained earnings
Autoregressive Model
An autoregressive model uses one or more past values to forecast the current value of an asset.
The model assumes that past values can have an impact on the current value but the number of past values it takes into account can vary.
For example, an AR(1) model will use one preceding value, an AR(2) model will use two preceding values, and so on.
The model assumes that past values can have an impact on the current value but the number of past values it takes into account can vary.
For example, an AR(1) model will use one preceding value, an AR(2) model will use two preceding values, and so on.
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