See: Dividend

Haircut
Industry term for the valuation of securities used to calculate a broker/dealer's net capital. The haircut will change depending on the class of a security, its market risk, and the time to maturity. The haircut may fluctuate from 0% to 30% (common for equity securities) to 100% for fail positions (securities with past due delivery) that have prospect of settlement.

See: Equity; Fail Position; Maturity Date; Risk

Half Life
Point in time when the principal on a mortgage backed security (issued or guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Association) has been repaid. It is presumed that the security has a half life of 12 years. However, depending on interest rate trends, specific mortgage pools can have longer or shorter half lives. If interest rates rise, homeowners will hold onto their mortgages longer than predicted, and half lives will rise. If interest rates fall, more homeowners will refinance their mortgages. Thus, principal will be paid off more quickly, and half lives will drop.

See: Federal National Mortgage Association; Government National Mortgage Association; Principal

Half Stock
A common or preferred stock that has a $50 par value. The usual standard is a $100 par value.

See: Common Stock; Par; Preferred Stock

Hammering The Market
Intense selling by investors who believe stock prices are inflated. Also, speculators anticipating a market drop will sell short, and are said to be hammering the market.

See: Selling Short; Speculator; Undervalued

Hard Dollars
Customers' payments for services rendered by a brokerage firm. For example, a customer's payment to a broker for a financial plan produced for them. Conversely, with soft dollars, a broker is compensated by commissions received if he places any of the trades specified in that financial plan.

See: Commission

Head And Shoulders Pattern
A technical trading pattern used to chart stock price trends. It resembles the head and shoulders outline of a person. In a head and shoulders top formation, the stock reaches one plateau (the left shoulder), then goes higher (the top of the head), and then drops back to the plateau again (the right shoulder). The head and shoulders top pattern signifies the reversal of an upward trend--prices should be falling. A head and shoulders bottom pattern signifies the reversal of a downward trend--prices should be rising.

See: Chartist; Technical Analysis

Heavy Market
A market that has falling prices due to a larger supply of offers to sell than bids to buy.

See: Bear Market

Hedge Clause
A disclaimer used in market letters, research reports, or other printed materials relating to the evaluation of investments. Its intent is to exonerate the writer from responsibility for the information's accuracy.

See: Research Department

Hedge Fund
Securities term that describes funds that use hedging techniques. For example, an option fund may use futures contracts on stock market indexes and short sales with stock options to limit risks.

See: Futures Contract; Hedging; Index; Options; Risk; Selling Short

Hedging
The use of almost opposite direction securities, instruments, or futures contracts as a method of attempting to reduce market risk. A perfect hedge is one that eliminates the prospects of any future gains or losses. Investors frequently try to hedge against inflation by purchasing assets (e.g, gold) that will rise in value faster than inflation.

See: Futures Contract; Hedge Fund; Inflation; Selling Short

Hemline Theory
Capricious idea that stock prices move in the same direction as women's dress hemlines. Short dresses and skirts are considered bullish signs that stock prices will rise. Longer dresses and skirts are considered bearish signs that stock prices will decline. Notwithstanding that it is occasionally correct, the hemline theory has endured more as wishful thinking than serious market analysis.

See: Bear Market; Bull Market; Market Analysis

High Flyer
Very speculative and high priced stock that moves up and down sharply over a short time span.

See: Speculation

High Grade Bond
Bond rated "AAA" or "AA" by Moody's or Standard & Poor's rating services.

See: Debt Instrument; Investment Grade; Rating; Risk

High Premium Convertible Debenture
A long term bond that has a high premium common stock conversion feature and offers a competitive interest rate. Premium refers to the difference between the convertible bond's market value and the value at which it is convertible into common stock. The "Kicker" (convertibility to stock) is designed as an inflation hedge.

See: Convertible Securities; Common Stock; Debt Security; Hedging; Inflation; Kicker

Highs
In daily trading, stocks that have reached new high prices for the current 52 week time period. To identify stock market trends, technical analysts observe the ratio between new highs and new lows.

See: Low; Technical Analysis; Trading Range

High-Tech Stock
Companies whose business is in high technology fields such as biotechnology, computers and robotics. High-tech companies that are successful may have above average earnings growth and volatile stock prices.

See: Price/Earnings Ratio; Volatile

High Yield Bond
Bond that has ratings of BB or lower and pays higher yields to offset its greater risk.

See: Investment Grade; Junk Bond; Rating; Risk; Yield

Historical Trading Range
Price range that a security has traded since going public. Technical analysts perceive the top of a historical range as the resistance level and the bottom as the support level. It is deemed as significant if a security breaks above the resistance level or below the support level. Analysts usually interpret this to mean that the security will reach new highs or lows and thus, its historical trading range expands.

See: Gap; Resistance Level; Support Level; Technical Analysis

Historical Yield
Yield provided by a mutual fund, typically a money market fund, over a specific time period.

See: Money Market; Mutual Fund; Yield

Hit the Bid
Seller's acceptance of the highest price offered for a stock. For example, if a stock's ask price is $24 1/4 and the current bid price is $24, sellers will hit the bid if they accept $24 a share.

See: Asked Price