What Does R Mean?
In securities trading, the letter R has a special meaning when added to the end of a ticker symbol. The letter R has a different meaning when applied as part of financial formula where it usually means some form of return.
On the NASDAQ exchange, R is used as a fifth letter in a company ticker symbol when the security being traded is a rights offering. Rights offerings allow shareholders the opportunity to purchase more shares directly from the company at a special price.
- The Letter R at the end of a NASDAQ ticker symbol means the security being quoted is a rights offering.
- Rights offerings that are sold by shareholders are traded on the open market.
- In financial formulas the letter R designates Returns.
Understanding Uses of R
When added to the end of a ticker symbol, the letter R designates that the shares in question are a rights offering. This is an issue of rights to a company's existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings within a fixed time period called the subscription period, which typically lasts one to three months. In a rights offering, a subscription price at which each share may be purchased is normally at a discount to the current market price.
Existing shareholders are not obligated to buy additional shares. They may decline to exercise their rights or, if the rights are transferable, they may sell them on the open market. Such securities are quoted on stock exchanges and traded with varying degrees of liquidity depending on the company involved.
Nasdaq-listed securities usually have four or five characters. The ticker symbol by itself has four letters; if a fifth letter appears, it identifies the issue as other than a single issue of common or capital stock. The Nasdaq has a fifth-letter identifier for every letter of the alphabet; for example, "D" denotes a new issue, "F" denotes a foreign issue, and "Q" denotes bankruptcy.
Use of R in Financial Formulas
R is also a common symbol representing "return" in many financial formulas. There are many different types of returns and they are usually denoted with the upper or lower case letter "R," though there is no formal designation. If there are multiple returns used in a calculation, they are often given subscript letters.
In formulas, lower case "r" usually represents the required rate of return. RE is usually expected return. RM is usually the return on the market as a whole. Rf or Rrf is usually the risk-free rate of return. R1, R2, R3, Ri are returns in the first, second, third and -ith period, respectively.
For example, the equation for the Sharpe ratio, a measure of risk-adjusted return, is as follows:
Sr=σpRp−Rfwhere:Sr=Sharpe RatioRp=Portfolio riskRf=Risk free rateσp=Standard deviation of portfolio
In this formula, Sr stands for Sharpe Ratio, Rp stands for Risk of the Portfolio being evaluated, and Rf stands for the Risk Free rate, and σp stands for the standard deviation of the portfolio's excess return above the risk free rate.