What is Engel’s Law? Engel’s Law is an economic theory that describes the relationship between household income and a particular good or service expenditures. It states that as family income increases, the percentage of income spent on food decreases. The theory was introduced by Ernst Engel, a German economist and statistician, in 1857. Besides Engel’s…
What is Environmental Economics? Environmental economics is a discipline of economics that studies the economic effects of environmental policies around the world. Its main focus is on the efficient allocation of environmental and natural resources and how alternative environmental policies deal with environmental damage, such as air pollution, water quality, toxic substances, solid waste, and…
What is Adjustable Life Insurance? Adjustable life insurance is a hybrid policy between term life and whole life insurance. Term life insurance is when the death benefit is paid at the time of death if death occurs within a certain number of years; otherwise, no benefit is paid. Whole life insurance is when…
What are American Depositary Shares (ADS)? Before we take a look at American Depositary Shares, we first need to understand the concept of American Depositary Receipts (ADR). The first ADR was introduced by J.P. Morgan back in 1927 for the British retailer, Selfridges. An ADR is a financial product that trades in the US financial…
What is an Employee Buyout (EBO)? An employee buyout (EBO) is a restructuring strategy used by employers to reduce costs and avoid potential layoffs. It is generally done by offering employees voluntary severance packages. If the package is accepted, the employee must leave the organization. If the employee does not accept the severance package, their…
What is an Employee Stock Option (ESO)? An employee stock option (ESO) is a form of financial equity compensation that is offered to employees and executives by their organization. The stock options offered come in the form of regular call options and allow the employee or executive to purchase their organization’s stocks at a specified…
What is Encroachment? Encroachment is a real estate situation where a property owner violates contractual property rights by unlawfully entering, building, or extending structures onto their neighbor’s land without permission. Whether the encroachment is intentional or not, the property owner is still liable for violating the contractual property rights of their neighbor. Structural encroachment occurs…
What is an Employee Stock Purchase Plan (ESPP)? An employee stock purchase plan (ESPP) refers to a stock program that allows participating employees to purchase their organization’s stock at a discounted price. In some cases, organizations offer stock discounts as high as 15%. Rather than directly purchasing their organization’s stock, participating employees contribute to their…
What is the Economic Calendar? The economic calendar displays the scheduled release dates of information related to the economy that significantly impacts the financial markets. The financial markets are a news-driven supply and demand vehicle; therefore, the release of significant news or economic events will drive price movements in the market. Many investors and traders…
What is Serial Correlation? Serial correlation is a statistical term used to describe the relationship – specifically, the correlation – between the current value of a variable and a lagged value of the same variable from earlier time periods. Serial correlation, also referred to as autocorrelation, is often used by financial analysts to predict future…
