Hysteresis

Definition of 'Hysteresis'


From the Greek term meaning "a coming short, a deficiency." Hysteresis, a term coined by Sir James Alfred Ewing, a Scottish physicist and engineer (1855-1935), refers to systems, organisms and fields that have memory. In other words, the consequences of an input are experienced with a certain lag time, or delay. One example is seen with iron: iron maintains some magnetization after it has been exposed to and removed from a magnetic field.

Investopedia explains 'Hysteresis'


In economics, hysteresis arises when a single disturbance affects the course of the economy. An example of hysteresis in economics is the delayed effects of unemployment. As unemployment increases, more people adjust to a lower standard of living. As they become accustomed to the lower standard of living, people may not be as determined to achieve the previously desired higher living standard. In addition, as more people become unemployed, it becomes more socially acceptable to be or remain unemployed. After the labor market returns to normal, some unemployed people may be disinterested in returning to the work force.



comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center