| Bubble | A persistent and expanding gap between actual stock prices and those warranted by the fundamentals; usually created by mass enthusiasm.
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| Common stock | Ownership shares in a firm; also called just stock and equity.
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| Dividend-discount model | The theory that the fundamental value of a stock equals the present value of expected future dividend payments.
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| Dividends | The payments made to a company's stockholders when the company makes a profit.
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| Dow Jones Industrial Average | The best-known index of stock market performance, it measures the average price of a single share in 30 very large and well-known American companies.
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| Equity | Ownership shares in a firm; also called stock and common stock.
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| Fundamental value | The present value of the expected future returns to owning an asset, which equals the asset's price in an efficient market.
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| Limited liability | The provision that even if a company fails completely, the maximum amount that shareholders can lose is their initial investment.
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| Market capitalization | The total market value of a company; the price of a share of stock times the total number of shares outstanding.
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| Mutual fund | A fund that pools the resources of a large number of small investors and invests them in portfolios of bonds, stocks, and real estate; managed by professional managers.
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| Nasdaq Composite Index | The value-weighted index of over 5,000 companies traded on the over-the-counter (OTC) market through the National Association of Securities Dealers Automatic Quotations service; the index is composed mainly of smaller, newer firms and in recent years has been dominated by technology and Internet companies.
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| Price-weighted index | An index based on the average price of a collection of individual stocks. Price-weighted averages give greater weight to shares with higher prices.
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| Residual claimant | The final person to be paid. Stockholders are residual claimants; if the company runs into financial trouble, only after all other creditors have been paid will they receive what is left, if anything.
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| Standard & Poor's 500 Index | A stock-market index that is based on the value of 500 of the largest firms in the U.S. economy.
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| Stock market | The market where the prices of common stock are determined.
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| Stock-market indexes | Index numbers that provide a sense of whether the value of the stock market is going up or down.
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| Theory of efficient markets | The notion that the prices of all financial instruments, including stocks, reflect all available information.
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| Value-weighted index | An index that is based on the value of the firms, like the S&P 500. Value-weighted indexes give greater weight to larger firms.
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| Wilshire 5000 | The most broadly based value-weighted stock index in use. It covers the roughly 6,500 publicly traded stocks in the United States.
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