Stock market glossary

- A

Share

A security of ownership that represents ownership of a portion of a company's capital. A company can issue several types of shares, including ordinary shares, preferred shares, bearer shares, and registered shares.

Bearer share

A share whose owner's identity is unknown to the company. This situation is most often encountered on the stock market, where a portion of the company's capital is held by several investors whose identities are known only to the financial intermediaries who manage it.

Registered share

Share whose holders' identities are recorded in the company's legal records.

Shareholder

Holder of a share, and as such enjoys various rights, including the right to information, the right to vote at meetings, and the right to dividends.

Rating Agency

A rating agency is a company specializing in rating and assessing the ability and willingness of a borrower (company, government, etc.) to meet its principal and interest repayment obligations throughout the life of its securities. A rating agency classifies the risk level of each issue and issuer by assigning short- and long-term ratings.

Amortization

Amortization is the accounting recognition of the (foreseeable) loss in value of an asset over time.

Fundamental (or financial) analysis

Study of the microeconomic and macroeconomic ecosystem, as well as a company's balance sheets and income statements, to assess its economic and financial health, as well as the short- and long-term prospects likely associated with it.

Technical (or chart) analysis

Attempt to predict the price performance of a financial asset through an analysis based on its historical price chart, the recognition of patterns that tend to repeat themselves, and the use of indicators.

Extraordinary General Meeting (EGM)

An EGM is a meeting of a company's shareholders outside of the normal timeframes to make urgent and important decisions.

Ordinary General Meeting (OGM)

The OGM is the annual meeting of shareholders to approve the accounts for the last financial year ending before the meeting.

Asset management

An Anglo-Saxon term for asset management.

Capital Increase

A means by which a company increases its share capital, either by issuing new shares or by incorporating its undistributed portion of profits.

AMF-UEMOA

Financial Markets Authority of the West African Economic and Monetary Union (formerly CREPMF).

- B

Technical decline

A decline in the value of a security that is not attributable to the economic and financial reality of the issuer. This may be due, for example, to profit-taking.

Beat the market

This means achieving better performance from your portfolio than the market as a whole.

Benchmark

This is a standard chosen for its representative nature (because it has the same characteristics as the element to be measured) and serves as a reference for performing a measurement.

Profit

A company's net profit over a period. It is calculated as the difference between total revenues and total expenses.

Earnings per Share (EPS)

This is the company's profit divided by the number of outstanding shares it has issued.

Beta

Beta refers to a stock's sensitivity to market fluctuations.

Balance Sheet

A matrix subdivided into two parts, presenting the company's uses or assets (fixed assets, receivables, etc.) on the one hand, and its resources or liabilities (equity, debt, etc.) on the other. The balance sheet must (generally) be balanced, meaning that the total assets are equal to the total liabilities.

Commercial Paper

Commercial paper is a negotiable debt security issued to bearer investors and is registered with authorized intermediaries in accordance with applicable laws and regulations. The purpose of these securities is to allow an issuer to borrow short-term (between 7 days and 2 years) from capital providers on the money market.

Treasury bill

A Treasury bill is a short-term, redeemable debt security issued by the Treasury (the State).

Bottom Up

This is an analysis strategy used in fundamental analysis. It consists of starting (in a logic of the particular to the general type) from the analysis of the company to that of the sector of activity or the country for example.

Stock Exchange

Public (intangible) market on which securities issuers (companies, governments, institutions, etc.) obtain capital to finance themselves from investors (individuals, companies, institutions). This market is regulated or organized, meaning it is managed by a central authority that ensures the proper completion of transactions, unlike the over-the-counter market.

BRVM

Regional Stock Exchange. This is the WAEMU stock market.

BRVM 10

The BRVM 10 is a statistical index composed of the ten (10) most active companies on the market. In other words, it is composed of the most liquid companies on the market, i.e., the listed companies whose shares have been bought or sold the most. A company's inclusion in the BRVM 10 is based on the following criteria:

• The average trading volume over the three months preceding the quarterly review must not be lower than the median of the average daily trading volumes for all securities.
• The trading frequency should always be greater than 50%, meaning that the security should be traded at least once out of every two times during the three-month study period. The BRVM 10 index is revised four (4) times a year (January, April, July, and October).

BRVM Composite

This is a statistical index that includes all listed companies on the BRVM.

- C

Share Capital:

A company's share capital represents the product of the number of shares issued by it and their nominal value.

Market Capitalization:

This is the value assigned to a company by the market. It corresponds to the product of the number of shares issued and the stock price.

Free Float Capitalization:

Free float capitalization is the share of a listed company's capital held by the public.

Equity:

Found on the liabilities side of the balance sheet, equity corresponds to the resources belonging to the company (as opposed to debt) and which allow it to finance its operations. It includes resources contributed by shareholders (share capital), as well as profits held in reserves and the profit for the year.

CDN

Negotiable certificate of deposit (see negotiable debt security).

Leader

is the leader of an investment syndicate composed of investment management companies.

Sales:

is the total sales of a company over a given period.

ISIN Code:

The ISIN (International Securities Identification Number) code is a unique identifier specific to each financial security (stock, bond, mutual fund, etc.). This code allows your financial intermediary to easily identify the asset you wish to trade. The ISIN code is issued by EUROCLEAR, the central securities depository in France. It replaced the SICOVAM security code and was implemented to standardize the international coding of financial products. It consists of 12 characters, the first two of which are letters that designate the company's nationality (BN for Benin, for example).

Compartment:

The WAEMU regional financial market (BRVM) is composed of four (04) compartments, including three (03) compartments for the equity market and one compartment for the bond market.

Income Statement:

A table showing all income and expenses recorded by the company during a period, generally the financial year, and whose purpose is to highlight the profit (enrichment) or loss (depletion) realized during this period.

Securities Account:

The securities account is composed of (i) the securities portfolio, which is all financial assets belonging to a natural or legal person and held in an account with a financial intermediary, and (ii) the cash balance. The cash balance is the uninvested portion of the portfolio. This portion generates neither capital gains nor interest.

Marketing Contract:

For each listed security, the Regional Stock Exchange appoints a specialist SGI, based on the issuer's proposal. The market-making contract concluded between the SGI and the issuer is sent to the Regional Stock Exchange for information. The purpose of this contract is to improve the market's natural liquidity by ensuring regular quotations, limiting price deviations, or promoting the inclusion of indications when quoting proves impossible.
The SGI specializing in a security is responsible for monitoring:

• the quotations of this security and those of its so-called secondary lines (rights, new shares, etc.).
• to ensure the regulation of the market for this security through its own positions, under the conditions set by an Instruction from the Regional Stock Exchange and in accordance with the contract signed between it and the issuing company.

Counterparty:

This refers to any participant (individual or legal entity) who carries out a transaction of the same nature but in the opposite direction to another market participant.

Correction:

This is a sudden market decline.

Quotation:

This is the process of determining the market prices of securities.

Percentage Quote:

Expression of a security's price as a percentage of its par value.

Coupon:

A coupon is a sum of money paid to the bondholder, corresponding to the interest paid by the issuer. It is the equivalent of dividends for a stock.

Accrued Coupon:

A bond's accrued coupon corresponds to the fraction of annual interest elapsed. It is listed separately from the bond.

Yield curve:

The yield curve is the graphical representation of the mathematical function of the effective interest rate at a given time on a zero-coupon bond as a function of its maturity for the same class of instruments. The rates represented are generally actuarial rates or zero-coupon rates. Investors use the yield curve as a benchmark for the risk-return ratio of different types of debt compared to the risk-free rates of return attached to government bonds. The yield curve can also be used as an indicator to anticipate changes in interest rates. The most frequently used yield curve is the zero-coupon yield curve.

Closing Price:

Security price at market close.

Opening Price:

A security's first price at the opening of the market session.

Reference price:

Short term:

A transaction is carried out over a short-term horizon when its maturity is between 7 days and 2 years.

CREPMF:

The Regional Council for Public Savings and Financial Markets is a regulatory body overseeing the WAEMU Regional Financial Market. It was created on July 3, 1996, by an agreement signed between the seven (7) states of the West African Economic and Monetary Union (WAEMU), to which Guinea-Bissau was added on July 7, 1997, following its accession to the Union's franc zone. Its main mission is to organize and oversee public offerings of savings, on the one hand, and to authorize and oversee participants in the Regional Financial Market, on the other. By Decision No. CM/13/09/2022, the CREPMF has changed its name to AMF.

Stock market cycle:

This is the succession of bullish and bearish phases of the market.

- D

Maturity Date

The date on which a debt security is fully repaid.

Ex-Date

The date on which a stock dividend is paid to the shareholder or a bond coupon is paid to the holder.

Entitlement Date

This is the date from which interest due on a financial security begins to accrue.

Insider Trading

Insider trading is generally defined as the offense by which a person known as an "insider" uses inside information to directly or indirectly carry out a transaction on a financial market in order to profit unfairly. Information is generally inside information when it is specific, not public, and could have an influence on the issuer's securities prices if it were made public.

Ex-dividend

Receipt of the dividend by the share holder, resulting in an equivalent decrease in its price.

Dilution

Decrease in earnings and dividend per share, following an increase in the number of shares outstanding.

Diversification

A strategy that involves investing in different asset classes and securities from different issuers to reduce the risk of investment concentration. This allows for a lower level of risk when building a portfolio.

Dividend Payout Ratio

It is defined as the ratio between the dividend per unit paid to shareholders and the net earnings per share.
Dividend Payout Ratio = Dividend per share / EPS

Dividend

This is the portion of a company's profits that is distributed to its shareholders. It is therefore the return on the capital contributed by shareholders.

Allocation Fee

Fee paid to existing shareholders when the company allocates bonus shares. These allocation rights can be resold in the same way as the shares themselves.

Custody Fee

Fee charged by a financial intermediary in return for holding your shares on their books.

Subscription Right (Preferential Subscription Right)

During the capital increase, existing shareholders benefit from a preferential subscription right that they can either exercise or trade on the stock exchange. Each existing share therefore corresponds to a subscription right. Physically, it is represented:

• by a detachable "subscription right" coupon for bearer shares;
• by a "rights certificate" that the company issues for stamping, for registered shares;
• by bookkeeping transactions expressing the transfer of rights in the case of dematerialized shares.

The security holder participates in the subscription of the new shares issued according to the quota or parity defined by the conditions of the capital increase.

Voting Rights

The right granted to all shareholders (with some exceptions) to participate in voting at general meetings. They can thus express their opinion on the management of their company. Some companies only allow shareholders who hold a minimum number of shares to attend their meeting.

Entry and Exit Rights

When a person wishes to acquire or sell shares in a mutual fund, they pay the mutual fund a fee, generally expressed as a percentage.

Duration

Duration is defined as the weighted average maturity of all discounted cash flows (including capital repayment) resulting from an investment. It is expressed in years.

- E

Bond Issue

A bond issue is a long-term loan (up to 7 years or more) whose total amount is divided into equal fractions of securities called bonds.

- F

Fixing/Fixage:

Cash Flow:

All receipts and disbursements of a company or related to an asset.

Equity Funds:

An equity fund is a mutual fund that consistently meets one of the following criteria:

• At least 70% of its net assets, excluding cash and securities of "Equity" UCITS, must be permanently invested and exposed in shares and allocation or subscription rights, listed on the Regional Stock Exchange or on any other regulated market operating regularly and open to the public within the WAEMU;
• At least 90% of its net assets, excluding cash, must be permanently invested and exposed in securities of one or more "Equity" UCITS.

Mutual Fund (FCP):

A mutual fund is a pool of resources collected from a multitude of investors and collectively invested on their behalf in the market by an asset manager. The capital gains generated by these investments are redistributed equitably to investors in proportion to their respective investments.

Bond Fund:

A bond fund is a mutual fund that consistently meets one of the following criteria:

• At least 70% of its net assets, excluding cash, must be permanently invested and exposed in:
  
  • bond issues that have been the subject of a public offering within the Union;
  • bills, similar Treasury bonds, and bond issues guaranteed by a Union State;
  • securities representing debt securities issued by Union Member States;
  • securities issued on the money market.
• Be permanently invested and exposed to a proportion of 90% of its net assets, excluding cash, in UCITS securities "Bonds and other debt securities" or in Debt Securitization Mutual Fund (FCTC) securities.

Shareholders' Equity:

See Shareholders' Equity

Management Fees:

These fees are charged once a year for discretionary management clients only. They are calculated based on the total valuation of the securities portfolio, excluding mutual funds.

- G

Portfolio Manager:

A professional responsible for managing a portfolio on behalf of their individual and institutional clients.

Active Management:

Portfolio management where the objective is to beat the market through investment and disinvestment decisions, rather than to replicate an index.

- H

Investment Horizon

This is the investment period an investor is considering: short, medium, or long term.

- I

In Fine

This is a repayment method that consists of paying off a loan in full at maturity, rather than over its entire life.

Financial Indicators

Quantities and ratios used to assess a company's economic and financial health.

Stock Market Index

A stock market index is a measure that allows us to measure the evolution of the market or a sector over time and therefore to gauge its performance. It corresponds to a weighted average, by market capitalization, of the prices of a sample of stocks. The main indices on the BRVM are the BRVM 10 and the BRVM C.

Composite Index

Index calculated from several other indices.

Accrued Interest

Interest owed by the issuer, from the date of the last payment, to a date t.

Post-deducted interest

This is interest calculated and paid at the end of an investment period.

Pre-deducted interest

Interest is said to be pre-deducted when it is calculated and deducted from the transaction value date.

Institutional Investors or Zinzins

Refers to large investors, banks, insurance companies, asset management companies, etc.

Investment grade

Designates securities with a low risk of non-repayment.

- L

Liquidity:

The liquidity of an asset is its ability to be sold or purchased quickly and at low cost. The more the asset is traded, the more liquid it is.

Market Liquidity:

Market liquidity corresponds to an investor's ability to carry out a transaction at the displayed price and for a large volume without affecting the asset's price. It is greater the greater the number of assets admitted to the market and the higher the frequency of transactions. Conversely, a less liquid market will suffer a discount because the risk taken by the investor is greater.

- M

Management Mandate

A contract by which an investor mandates a financial professional to manage their assets.

Bear Market:

A market that declines over a relatively long period of time is said to be bearish.

Over-the-Counter Market

Over-the-counter refers to a transaction concluded directly between two parties. An over-the-counter transaction is the opposite of a transaction carried out on an organized market (e.g., a stock market), where the transaction is carried out on a computer platform with centralized orders on standardized products. The interbank market and the foreign exchange market, for example, are markets where transactions are processed over-the-counter.

Efficient Market

Refers to a market that continuously and promptly reflects all known information about its environment that may affect it.

Interbank Market

This is the market in which authorized banks and financial institutions lend and borrow liquidity from each other. It is a short-term market.

Money Market

Market in which investors acquire securities with short-term maturities.

Primary Market

Also called the new market, this is the market on which financial securities are issued. This may be a capital increase, a bond issue, etc.

Secondary Market

Also called the second-hand market, this is the market on which securities issued on the primary market are traded between investors.

Maturity

This is the lifespan of a title.

Residual Maturity

This is the time between a date t and the maturity date of a security.

Capital Loss

Unrealized loss attributable to the decline in the value of a security. The capital loss is realized when the security is actually sold.

- N

Non-investment grade

Also called speculative grade or high yield. This term refers to securities that present a high risk of non-repayment, bankruptcy, or a collapse in value. But in return, they offer better returns to investors.

Financial rating

A financial rating is a technique used to measure a borrower's solvency and willingness to meet their short- and/or long-term obligations. It is often established by a rating agency approved by a regulator, although any creditor can make their own assessment.

- O

Bond

A bond is a security that represents a medium- or long-term loan granted to a company or public institution (local authority or state). In exchange for this loan, the bondholder (the bondholder) receives a regular payment, the coupon, according to the conditions set out in the issuance contract.

Bond convertible into shares

These are bonds that can be exchanged for new shares of the issuing company, under the conditions and periods defined by the contract.

Public Purchase Offer (PPO)

This is a transaction by which a person (natural or legal) proposes to acquire the shares of a company (the target) in order to take control of it.

Public Offering (OPV)

This is a transaction by which a shareholder agrees to sell a specified quantity of shares at a pre-set price. It is generally followed by an initial public offering.

Collective Investment Undertaking

This is a collective management organization that can be either a UCITS or an Alternative Investment Fund under regional or foreign law, in the form of a Mutual Fund managed by a Mutual Fund Management Company, or in the form of an Investment Company.

Undertaking for Collective Investment in Transferable Securities

This is a collective investment scheme whose:

• exclusive purpose is collective investment in transferable securities or other liquid financial instruments, capital raised from qualified or non-qualified investors, and whose operation is subject to the principle of risk spreading;
• units are, at the request of the holders, redeemed or reimbursed, directly or indirectly, from the assets of these schemes.

- P

Even

Refers to the face value of a security.

Coupon Foot

A quote is said to be quoted at the coupon foot when it expresses the value of a bond excluding the accrued coupon.

Capital Gain

Unrealized gain attributable to an increase in the value of a financial security. The capital gain is realized when the security is actually sold.

Price Earnings Ratio (PER)

is a price indicator that allows you to determine whether a stock is undervalued or overvalued. It is calculated as follows: share price/earnings per share. It also allows you to compare companies in the same sector and estimate a company's future performance. A stock with a low PER is cheap.

Price Earning Growth (PEG)

PEG is calculated by dividing the PER by the average growth rate of expected earnings over several years. Its main advantage is that it allows a high PER to be put into perspective by taking into account expected earnings growth. Unlike the PER, the PEG offers a "dynamic" analysis of the company. The PEG was developed to improve the imperfections of the PER by weighting it by earnings growth. A stock whose PER is higher than its expected earnings growth will be considered overvalued.

Price to book ratio (PBR)

Like the PE ratio, the PBR is a price indicator that shows whether a company is overvalued in the market compared to its equity. It is calculated by dividing the company's market capitalization by its equity. If the PBR is greater than unity, the company's stock is considered overvalued.

Risk premium

This is the yield gap between the market rate and the risk-free rate on government bonds.

Issue premium

The difference between the face value of a bond and its issue price.