Guide to Analysing Companies

ERM
See exchange rate mechanism.
Escrow account
A bank account kept by a third party on behalf of two others
who are (usually) in dispute about its rightful ownership. The
disputing parties try to set out conditions under which they will
agree to let the money be released. When the conditions have
been met, the third party releases the funds.
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ESOP
See employee stock ownership plan.
ETF
See exchange traded fund.
Ethical investing
The practice of investing only in the shares of companies that
meet certain ethical and environmental criteria. There is no firm
definition of what these criteria are, but most ethical funds
exclude, among others, the shares of manufacturers of tobacco
and munitions. Ethical funds measure their performance
against specific indices, such as the ftse4Good Index. Also
called socially responsible investing (sri), ethical investing has
its supporters but is no guarantee of profitability. Detractors
argue that by excluding the shares of some companies, such
funds are riskier and more prone to volatility.
Eurex
An electronic platform that has become one of the world’s
largest markets for the trading of derivatives. Eurex was
formed in 1996 from a merger of the dtb German futures ex-
change and soffex, the Swiss options and financial futures
exchange. Since then it has grown on both sides of the Atlantic
to dominate trading in long-term interest-rate futures. Its
biggest selling point is that traders can deal more or less when
they like and wherever they are.
Euribor
See european interbank offered rate.
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Euro
The name of the single European currency. Under the terms of
the Maastricht treaty, it was introduced in 11 eu member states
– Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain – in stages
from January 1999, when the exchange rates between the euro
and the currencies of the countries that joined it were first fixed.
For the first couple of years the euro was used mainly by
banks, companies and other commercial organisations in deal-
ings among themselves. Greece joined the group on January 1st
2001, a year before the launch on January 1st 2002 of euro
notes and coins in the participating countries. By pre-stocking
with euros more than 170,000 atms, vending machines and
other outlets throughout the euro zone, the authorities were able
to withdraw most national currencies within a couple of
months of the start of the year. Indeed, the changeover went re-
markably smoothly. What lingered were gripes about the infla-
tionary effect of the euro’s introduction. Before the changeover,
the governments involved had insisted that when the new
notes and coins were introduced, some prices would be
rounded up and some would be rounded down. Consumers
were sceptical, and rightly so. In the event, nearly all prices were
rounded up and stayed up, thus to the cost of living.