Glossary – Letter E

Early retirement age

Members who are within 10 years of pensionable age are eligible to receive an early retirement pension from the plan (i.e., if the plan’s pensionable age is 60, members could choose to retire at any time between the age of 50 and 60).  However, the amount of pension may be reduced accordingly.

Earned Income

The amount of money you are allowed to contribute to an RRSP, for any given year, is calculated based upon your Earned Income. Canada Revenue Agency (CRA) defines Earned income as the following.

  • Gross salary and wages from employment
  • Net income from self-employment or a business in which you were an active partner
  • Royalties for a work or invention of which you were the author or inventor
  • Net rental income from real property
  • Taxable support payments (ie. alimony or separation allowances)
  • Net research grants received
  • Employee profit sharing plan allocations
  • Supplementary unemployment benefits (do not include regular EI benefits)
  • Disability benefits received under Canada Pension Plan or Quebec Pension Plan

From the amounts listed above, deduct the following items.

  • Current-year losses from self-employment or a business in which you were an active partner
  • Current-year rental loss from rental properties
  • Deduct support payments paid (ie. alimony, separation allowances)
  • Business income from the disposition of eligible capital property in excess of recaptured tax deductions.

The resulting net amount is the Earned Income eligible for calculating your allowable RRSP contributions.

Earnings / Income Statement

A financial statement which shows a company’s revenues and expenditures resulting in either a profit or a loss during a financial period.

Earnings Per Common Share

The portion of after-tax profits of a company attributable to a single common share.

Economic indicators

There are three major categories — lagging, coincident and leading indicators. Lagging indicators represent indicators after the fact; coincident describe current conditions; and leading indicators forecast changes in the economy. Statistics Canada generates many of these numbers. Investors watch these indicators closely because economic trends can affect the price of securities and interest rates.

Economic moat

The idea of an economic moat refers to how likely companies are to keep competitors at bay for an extended period. One of the keys to finding superior long-term investments is buying companies that will be able to stay one step ahead of their competitors, and it’s this characteristic (think of it as the strength and sustainability of a firm’s competitive advantage) that is trying to be captured with the economic moat rating.

One of the first things we do when we’re thinking about the size of a firm’s economic moat is look at the company’s historical financial performance. Companies that have generated returns on capital higher than their cost of capital for many years running usually have a moat, especially if their returns on capital have been rising or are fairly stable.

Of course, the past is a highly imperfect predictor of the future, so we look carefully at the source of a company’s excess economic profits before assigning a moat rating. For example, a competitive advantage created by a hot new technology usually isn’t very sustainable, because it won’t be too long until someone comes along and invents a better widget.

Here are some of the attributes that can give companies economic moats:

  1. Huge Market Share: When a firm enjoys economies of scale in areas like manufacturing, sales, and marketing, it can be pretty tough for a competitor to catch up.
  2. Low-Cost Producer: The ability to produce products or services at a lower cost than competitors is an advantage that’s especially potent in commodity industries.
  3. Patents, Copyrights, or Governmental Approvals and Licenses: Some companies generate enormous profits when the government artificially protects their products or markets.
  4. Unique Corporate Culture: Although you should be careful of placing too much emphasis on this attribute, since it’s such a “soft” method of determining competitive advantage, there’s no question it can make a difference.
  5. High Customer-Switching Costs: If you can make it tough for your customers to use a competitor, it’s usually easy to keep ratcheting prices up just a bit year after year–which can lead to big profits.
  6. The Network Effect: This is a relatively rare, but potentially quite potent, source of competitive advantage, and often accrues by the first mover in an emerging technology. Because a network’s value increases as more people use it, the company that creates the network can create a massive economic moat.

Educational Assistance Program (EAP)

An EAP is an amount paid from a Registered Education Savings Plan (RESP) to a student beneficiary to help pay for the cost of post-secondary education. An EAP consists of all or a combination of the following amounts held in an RESP account:

  • Income earned on the contributions
  • Canada Educational Savings Grants (CESG)
  • Canada Leaning Bond (CLB), or
  • Amounts under a designated provincial education savings program

The EAP does not include refunds of contributions that are usually made to the subscriber of the plan for the purpose of assisting a beneficiary’s education at the same time.

EegX Canada Inc.

A subsidiary of Global Financial Group Inc. (GFG), is a fully regulated exchange developed for the listing and trading of real estate securities and related financial products.

Effective Date

The RESP’s Effective Date is the date the plan was opened, and determines when RESP contributions and transfers into an RESP account must end, when Accumulated Income Payments (AIP) can begin, and when the RESP account must be terminated.

Efficient Market Hypothesis (EMH)

A market theory that evolved from a 1960’s Ph.D. dissertation by Eugene Farma, the EMH states that at any given time and in a liquid market, security prices fully reflect all available information.   The EMH exists in various degrees; weak, semi-strong and strong, which addresses the inclusion of non-public information in market prices. This theory contends that since markets are efficient and current prices reflect all information, attempts to outperform the market are essentially a game of chance rather than one of skill.

The weak form of EMH assumes that current stock prices fully reflect all currently available security market information. It contends that past price and volume data have no relationship with the future direction of security prices. It concludes that excess returns cannot be achieved using technical analysis.

The semi-strong form of EMH assumes that current stock prices adjust rapidly to the release of all new public information.  It contends that security prices have factored in available market and non-market public information  It concludes that excess returns cannot be achieved using fundamental analysis.

The strong form of EMH assumes that current stock prices fully reflect all public and private information.  It contends that market, non-market and inside information is all factored into security prices and that no one has monopolistic access to relevant information. It assumes a perfect market and concludes that excess returns are impossible to achieve consistency.

Electronic purse

A payment instrument in which monetary value is stored in electronic form, on an embedded computer chip.

Note: Stored-value products include “hardware” or “card-based” devices (prepaid cards, such as electronic purses) and “software” or “network-based” products (e.g., cybercash). These products are prepaid; that is, the monetary value is purchased in advance by the consumer, stored electronically, and reduced whenever purchases are made. An electronic purse can be disposable or reloadable.

Energy Sector

These companies are involved in the exploration, production, refinement and distribution of oil and gas products. It also includes companies that manufacture equipment used by the oil and gas industry, as well as companies that provide services to the oil and gas industry.

Equal-Weight Investing

Is an investment approach that gives each investment is an asset category the same dollar weight, or importance.

For bonds in a set maturity schedule, an equal-weight investment is made in each year of maturity. For example, $25,000 invested in 5 individual bonds, maturing in each of the next 5 years would receive an equal-weight with $5,000 invested in each maturity.

For stocks, each individual stock would receive the same dollar amount. So if you are investing $25,000 in 10 individual companies, each investment would receive $2,500.

Under an Equal-Weight investment structure, the smallest companies are given equal weight to the largest companies in an equal-weight index fund or portfolio. This allows all of the companies to be considered on an even playing field.

Equal weighting differs from the weighting method more commonly-used by funds and portfolios (Market-Capitalization Weighted) in which stocks are weighted based on their market capitalization. Equal-weighted index funds tend to have higher stock turnover than market-cap weighted index funds and, as a result, they usually have higher trading costs. Equal-Weight Index funds might have a higher Portfolio Turnover Ratio (PTR), but they have a long history of outperforming Market-Capitalization Weighted Index ETFs.

One of the major advantages that Equal-Weight offers is that it self-corrects for asset drift as stock markets rise and fall.

Equipment Trust Certificate

A security, more common in the U.S. than in Canada, that is generally issued by a railroad or airline to pay for new movable equipment. It is secured by a first lien on the equipment.


The stock, or ownership of shareholders in a company.

Equity earnings

A company’s share of an unconsolidated subsidiary’s earnings. The equity accounting method is used when a company owns 20% to 50% of a subsidiary.

Equity fund

A mutual fund that invests primarily in common or preferred stocks.

Escrowed / Pooled shares

Outstanding shares of a company which, while entitled to vote and receive dividends, may not be bought or sold unless special approval is obtained. This technique is commonly used by mining and oil companies when treasury shares (authorized but unissued shares) are issued for new properties. Shares can be released from escrow (freed to be bought and sold) only with the permission of applicable authorities such as the stock exchange and/or the provincial securities commission.

Estate Planning

The process of planning the transfer of all personal assets at death to chosen beneficiaries.

ETF Provider / ETF Sponsor

The company that establishes and administers an Exchange Traded Fund (ETF). It administers the ETF by dealing with the creation units and institutional investors when there are changes to the underlying index.


Common currency adopted by 11 European nations on January 1, 1999. On January 1, 2002, the euro began to replace all national currencies as euro notes and coins were put into circulation. By July 1, 2002, all national notes and coins were to be withdrawn from circulation. The original countries — Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain — were joined by Greece on Jan. 1, 2001.

Ex Dividend

This means “without dividend.” If a share quoted ex dividend is purchased, the investor is not entitled to an upcoming already-declared dividend. The seller receives this dividend.

Ex Rights

This means “without rights.” Buyers of shares quoted ex rights are not entitled to forthcoming rights.

Exchange Fund Account

A special federal government account operated by the Bank of Canada to intervene in the world’s foreign exchange markets and affect Canada’s foreign exchange rate. Direct intervention to change the direction of exchange rate fluctuations is infrequent, and public economic policies are more significant in changing supply and demand for foreign exchange, and therefore the exchange rate.

Exchange Traded Commodities (ETCs)

Exchange Traded Funds that invest in commodities like energy, metals or agriculture. ETCs trade like ETFs but are investment vehicles that track the performance of an underlying commodity index rather than an equity index.

Exchange Traded Funds (ETFs)

ETFs represent a product that tracks a particular index such as the S&P 500 or the S&P/TSX Composite Index. In other words, it is made up of a basket of all the stocks in the index. ETFs differ from index-based mutual funds in that they trade as stocks on the exchanges and are therefore subject to brokerage commission fees. ETFs, in some cases, can actually beat the index they track by using futures contracts to anticipate market changes and reduce volatility.

Exchange Traded Notes (ETNs)

ETNs like ETFs are linked to the performance of an index; however, unlike ETFs, ETNs are debt obligations issued by a bank. ETN returns are based upon the performance of an index or another benchmark, minus annual fees. ETNs have no tracking error risk but they do have credit risk.

Exchange Traded Products (ETPs)

A term used to describe a specialized grouping of exchange traded investments that have a common structure. The term is often used to categorize a grouping that includes Exchange Traded Funds, Exchange Traded Commodities, and Exchange Traded Notes.


A person legally authorized to settle the estate of a deceased person. The executor’s authority is indicated in the last will of the deceased person. An executor (executrix if a female) may be a bank trust officer, a lawyer, a family member, or a trusted friend.

Exempt list

Large professional buyers of securities, mostly financial institutions, that are offered a portion of a new issue by one member of the banking group, on behalf of the whole syndicate.

Exempt market

An unregulated market for sophisticated participants in government bonds, corporate issues and commercial paper. A prospectus is not required to raise money privately from these private investors (largely institutions, but also individual investors) and registration of the issue with a securities commission is not needed.


The BCSC provides a number of exemptions from the registration and prospectus requirements. If you purchase securities using these exemptions, the securities are subject to resale restrictions. This means that the securities may not be resold (transferred) unless certain conditions are met. In almost all cases, the securities are subject to a “seasoning period” or a “hold period” – a specified period of time during which the purchaser cannot sell the securities.


The action taken by the holder of a call option if he or she wishes to purchase the underlying security, or by the holder of a put option if he or she wishes to sell the underlying security. Also refers to the action taken by a rights or warrant holder.

Exercise price

The price at which the underlying stock of a call option can be purchased, or the price at which the underlying stock of a put option can be sold. Also referred to as the strike price.

Expected return

The overall profit you expect to receive from an investment in the future; may be very different from the actual returns that you eventually receive.

Expiration Date

The date when put and call options and rights and warrants expire, as well as other privileges or conversion features.

Extendible bond or debenture

A bond or debenture issued with a specific maturity date, but granting the holder the option to extend the maturity date by a specified number of years.


Short for “extra dividend.” A dividend in the form of either stock or cash in addition to the regular common dividend the company usually pays to shareholders. Also referred to as a special dividend.