suneetk/investopedia_terms huggingface dataset:
# 11th District Cost of Funds Index: What It is, How It Works

## What Is the 11th District Cost of Funds Index?

The 11th District Cost of Funds Index (COFI) was a monthly index that reflected the average interest rate paid by savings institutions in Arizona, California, and Nevada on checking and savings accounts. It was one of many indices used by mortgage lenders to adjust the interest rate on [adjustable rate mortgages](https://www.investopedia.com/terms/a/arm.asp) (ARM) and was launched in 1981. With an ARM mortgage, the interest rate on a mortgage moves up and down along with some standard interest rate chosen by the lender, and COFI was one of the most popular indices in the western states.

Published on the last day of each month, the COFI represented the [cost of funds](https://www.investopedia.com/terms/c/costoffunds.asp) for Western savings institutions that were members of [Federal Home Loan Bank](https://www.investopedia.com/terms/f/fhlb.asp) of San Francisco, a self-regulatory agency, and satisfied the Bank's criteria for inclusion in the index. The Federal Home Loan Bank of San Francisco stopped publishing the COFI on Jan. 31, 2022. The Federal Home Loan Mortgage Corporation ([Freddie Mac](https://www.investopedia.com/terms/f/freddiemac.asp)) created a replacement index called the Enterprise 11th District COFI Replacement Index. 

## Understanding the 11th District COFI

The 11th District Cost of Funds Index (COFI) was computed using several different factors, with interest paid on savings accounts comprising the largest weighting in the average. As a result, the index tended to have low volatility and follow market interest rate changes somewhat slowly; it was generally regarded as a two-month lagging indicator of market interest rates. The interest rate on a mortgage would not match the COFI, rather the ARM rate that was typically 2% to 3% higher than COFI, depending on the borrower's credit history, the size and terms of the loan, the ability of the borrower to negotiate with the bank, and many other factors.

Because was computed using data from three western states, the COFI was primarily used in the western U.S., while the 1-year Treasury index was the measure of choice in the eastern region.
# Barrels Of Oil Equivalent Per Day (BOE/D): Definition and Uses

## What Does Barrels Of Oil Equivalent Per Day Mean?

Barrels of oil equivalent per day (BOE/D) is a term that is used often in conjunction with the production or distribution of [crude oil](https://www.investopedia.com/terms/c/crude-oil.asp) and natural gas. Many oil companies produce both of these commodities, but the unit of measure for each is different. Oil is measured in barrels and natural gas is measured in cubic feet. To help facilitate like-for-like comparisons, the industry standardized natural gas production into "equivalent barrels" of oil. One barrel of oil is generally deemed to have the same amount of energy content as 6,000 cubic feet of natural gas. So this quantity of natural gas is "equivalent" to one barrel of oil.

When measuring a company's natural gas production output, management often wants to know how many equivalent barrels of oil they are producing. This makes it easier to compare themselves to other industry participants. The Society of Petroleum Engineers provides [conversion tables](http://www.spe.org/industry/unit-conversion-factors.php) that help illustrate unit equivalencies and some of the factors that affect comparison and conversion.

## Understanding Barrels Of Oil Equivalent Per Day (BOE/D)

Large oil producers are evaluated and refer to their production by the number of cubic feet of natural gas, and/or by the [barrels of oil equivalent](https://www.investopedia.com/terms/b/barrelofoilequivalent.asp), they produce per day. This is an industry standard and a way that [investors](https://www.investopedia.com/terms/i/investor.asp) can compare the production and/or the reserves of two oil/gas companies.

​BOE/D is important to the financial community because it is used as a way to help determine the value of a company. There are several different metrics equity and bond analysts use to evaluate the performance of an oil company. First is a [company's total production](https://www.investopedia.com/ask/answers/061115/how-does-oil-and-gas-company-measure-and-state-its-production.asp), which is calculated on a total equivalent barrel basis. This helps to determine the scale of the business. Companies that produce little oil and a lot of natural gas could be unfairly evaluated if equivalent barrels were not counted.

​Another important measure of a company is the size of its reserves. Equivalent barrels play an important role here too because excluding natural gas reserves can unfairly impact the size of a company. When banks are determining the size of a loan to extend, it is important to consider the total size of the company's reserve base. Converting natural gas reserves to equivalent barrels is an easy to understand like-for-like metric that helps to determine the amount of debt a company has relative to its reserve base. If this isn't evaluated correctly, a company can be unfairly impacted with higher borrowing costs.
# Generally Accepted Principles and Practices (GAPP) Overview

## Definition of Generally Accepted Principles And Practices (GAPP)

The generally accepted principles and practices (GAPP), which are also known as the Santiago principles, are standardized business procedures related to the operation of [sovereign wealth funds](https://www.investopedia.com/terms/s/sovereign_wealth_fund.asp) (SWFs), which have agreed to pursue financial rather than political agendas and maintain a stable global financial system.

## Understanding Generally Accepted Principles And Practices (GAPP)

The generally accepted principles and practices (GAPP), were agreed upon by the International Working Group of the Sovereign Wealth Funds (IWG)—23 countries with SWFs—in October 2008. In response to the concern of [investors](https://www.investopedia.com/terms/i/investor.asp) and regulators about the inadequate transparency, independence, and governance of the industry, the IWG resolved that SWFs demonstrate that their arrangements are properly set up and investments are made on an economic and financial basis—instead of pursuing political agendas.

GAPP is underpinned by the following guiding objectives for SWFs, defined as "special purpose investment funds or arrangements, owned by the general government":

1.  To help maintain a stable global financial system and free flow of capital and investment;
2.  To comply with all applicable regulatory and disclosure requirements in the countries in which they invest;
3.  To invest on the basis of economic and financial risk and return-related considerations; and
4.  To have in place a transparent and sound governance structure that provides for adequate operational controls, [risk management](https://www.investopedia.com/terms/r/riskmanagement.asp), and accountability."

The 24 voluntary Santiago Principles simply provide a framework for these guiding principles in three key areas: legal, institutional, and investment and risk. The principles are maintained and promoted by the [International Forum of Sovereign Wealth Funds](http://www.ifswf.org/) (IFSWF), whose members voluntarily endorse the principles and seek to implement them in their governance and investment practices. As of 2021, the forum represented more than 30 sovereign wealth funds from all corners of the globe.

> **Article Sources**
>
> 1.  International Working Group of Sovereign Wealth Funds. "[Sovereign Wealth Funds: Generally Accepted Principles and Practices](https://www.ifswf.org/sites/default/files/santiagoprinciples_0_0.pdf)," Pages 4 and 27. Accessed March 18, 2021.
>     
> 2.  International Working Group of Sovereign Wealth Funds. "[Sovereign Wealth Funds: Generally Accepted Principles and Practices](https://www.ifswf.org/sites/default/files/santiagoprinciples_0_0.pdf)," Pages 7-9. Accessed March 24, 2021.
# Heteroskedastic

## DEFINITION of Heteroskedastic

Heteroskedastic refers to a condition in which the [variance](https://www.investopedia.com/terms/v/variance.asp) of the residual term, or error term, in a [regression model](https://www.investopedia.com/terms/r/regression.asp) varies widely. If this is true, it may vary in a systematic way, and there may be some factor that can explain this. If so, then the model may be poorly defined and should be modified so that this systematic variance is explained by one or more additional predictor variables.

The opposite of heteroskedastic is [homoskedastic](https://www.investopedia.com/terms/h/homoskedastic.asp). Homoskedasticity refers to a condition in which the variance of the residual term is constant or nearly so. Homoskedasticity (also spelled "homoscedasticity") is one assumption of linear regression modeling. Homoskedasticity suggests that the regression model may be well-defined, meaning that it provides a good explanation of the performance of the dependent variable.

## BREAKING DOWN Heteroskedastic

[Heteroskedasticity](https://www.investopedia.com/terms/h/heteroskedasticity.asp) is an important concept in regression modeling, and in the investment world, regression models are used to explain the performance of securities and investment portfolios. The most well-known of these is the [Capital Asset Pricing Model](https://www.investopedia.com/terms/c/capm.asp) (CAPM), which explains the performance of a stock in terms of its volatility relative to the market as a whole. Extensions of this model have added other predictor variables such as size, momentum, quality, and style (value vs. growth).

These predictor variables have been added because they explain or account for variance in the dependent variable, portfolio performance, then is explained by CAPM. For example, developers of the CAPM model were aware that their model failed to explain an interesting anomaly: high-quality stocks, which were less volatile than low-quality stocks, tended to perform better than the CAPM model predicted. CAPM says that higher-risk stocks should outperform lower-risk stocks. In other words, high-volatility stocks should beat lower-volatility stocks. But high-quality stocks, which are less volatile, tended to perform better than predicted by CAPM.

Later, other researchers extended the CAPM model (which had already been extended to include other predictor variables such as size, style, and momentum) to include quality as an additional predictor variable, also known as a "factor." With this factor now included in the model, the performance anomaly of low volatility stocks was accounted for. These models, known as [multi-factor models](https://www.investopedia.com/terms/m/multifactor-model.asp), form the basis of [factor investing](https://www.investopedia.com/terms/f/factor-investing.asp) and smart beta.
# High-Low Index: Definition, Formula, Example Chart

## What is the High-Low Index?

The high-low index compares stocks that are reaching their 52-week highs with stocks that are hitting their 52-week lows. The high-low index is used by investors and traders to confirm the prevailing market trend of a broad [market index](https://www.investopedia.com/terms/m/marketindex.asp), such as the Standard and Poor’s 500 index (S&P 500).

## Understanding the High-Low Index

The high-low index is simply a 10-day [moving average](https://www.investopedia.com/terms/m/movingaverage.asp) of the record high percent indicator, which divides new highs by new highs plus new lows. The record high percent indicator is calculated as follows:

﻿ $\begin{aligned} \text{Record High Percent} = \frac{ \text{New Highs} }{ \text{New Highs} + \text{New Lows} } \times 100 \end{aligned}$﻿

Investors consider the high-low index to be [bullish](https://www.investopedia.com/terms/b/bull.asp) if it is positive and rising, and bearish if it is negative and falling. Since the index can be volatile on a day-to-day basis, market technicians generally apply a moving average on the data to smooth out the daily swings. This helps generate more reliable signals.

## Interpreting the High-Low Index

A high-low index above 50 means more stocks are reaching 52-week highs than reaching 52 lows. Conversely, a reading below 50 shows that more [stocks](https://www.investopedia.com/articles/basics/06/invest1000.asp) are making 52-week lows compared to stocks making 52-week highs. Therefore, investors and traders are generally bullish when the index rises above 50 and bearish when it declines below 50. Typically, readings above 70 indicate that the market is [trending higher](https://www.investopedia.com/terms/t/trending-market.asp), while a reading below 30 suggests that the market is in a downtrend. Investors should also be aware that If the market is trending strongly, the high-low index can give extreme readings for a prolonged period.

## Trading with the High-Low Index

Many traders add a 20-day moving average to the high-low index and use it as a [signal line](https://www.investopedia.com/terms/s/signal_line.asp) to enter a trade. The index generates a buy signal when it crosses above its moving average, and a sell signal when it crosses below its moving average. Traders should filter the signals generated by the high-low index with other technical indicators. For example, a trader might require the [relative strength index (RSI)](https://www.investopedia.com/terms/r/rsi.asp) to be above zero when the index crosses above its 20-day moving average to confirm upward momentum.

The high-low index can also be used to form a bullish or bearish bias. For instance, if the indicator is above 50, a trader may decide to trade on the long side of the market only.

## Example of the High-Low Indicator

![Image](https://www.investopedia.com/thmb/GxeKk4inV-auqBuXYstBTCt46Bk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_High-Low_Index_Jun_2020-01-2899b846629f448fbe7400d69f65a22b.jpg)

**
# Highest In, First Out (HIFO) Definition vs LIFO, FIFO

## What Is Highest In, First Out (HIFO)?

Highest in, first out (HIFO) is an inventory distribution and accounting method in which the inventory with the highest cost of purchase is the first to be used or taken out of stock. This will impact the company's books such that for any given period of time, the inventory expense will be the highest possible for the [cost of goods sold](https://www.investopedia.com/terms/c/cogs.asp) (COGS), and the ending inventory will be the lowest possible.

HIFO usage is rare to non-existent and is not recognized by GAAP.

### Key Takeaways

*   Highest in, first out (HIFO) is a method of accounting for a firm's inventories wherein the highest cost items are the first to be taken out of stock.
*   HIFO inventory helps a company decrease their taxable income since it will realize the highest cost of goods sold.
*   HIFO usage is quite rare and is not recognized by general accounting practices and guidelines such as GAAP or IFRS.

## Understanding Highest In, First Out

Accounting for inventories is an important decision that a firm must make, and the way inventories are accounted for will impact financial statements and figures.

Companies would likely choose to use the highest in, first out (HIFO) inventory method if they wanted to decrease their taxable income for a period of time. Because the inventory that is recorded as used up is always the most expensive inventory the company has (regardless of when the inventory was purchased), the company will always be recording the maximum cost of goods sold.

> **Important**
>
> Companies may occasionally change their inventory methods in order to smooth their financial performance.

Contrast this with other inventory recognition methods such as [last in, first out (LIFO),](https://www.investopedia.com/terms/l/lifo.asp) in which the most recently purchased inventory is recorded as used first, or [first in, first out (FIFO),](https://www.investopedia.com/terms/f/fifo.asp) in which the oldest inventory is recorded as used first. LIFO and FIFO are common and standard inventory accounting methods, but it is LIFO that is part of generally accepted accounting principles (GAAP). Meanwhile, HIFO is not often used and is furthermore not recognized by GAAP as standard practice.

## Some Highest In, First Out Implications

A company could decide to use the HIFO method to reduce taxable income, but there are some implications to be made aware of, including:

1.  First, because it is not recognized by GAAP the company's books may come under greater scrutiny by auditors and result in an opinion other than an unqualified one.
2.  Second, in an inflationary environment, inventory that was taken in first may be subject to obsolescence.
3.  Third, net working capital would be reduced with lower value inventory. Last but not least, if the company relies on [asset-based loans](https://www.investopedia.com/terms/a/assetbasedlending.asp), lower inventory value will decrease the amount it is eligible to borrow.
# Hodrick-Prescott (HP) Filter: Why You Should Not Use It

![Hodrick-Prescott (HP) Filter](https://www.investopedia.com/thmb/QNDclCS64EFwrEse-ZkCvxO2rMo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/hpfilter-Final-cff314b2a3d24d0ca71d24da71e9554c.png)

*— Investopedia / Theresa Chiechi*

## What Is the Hodrick-Prescott (HP) Filter?

The Hodrick-Prescott (HP) filter refers to a [data-smoothing](https://www.investopedia.com/terms/d/data-smoothing.asp) technique. The HP filter is commonly applied during analysis to remove short-term fluctuations associated with the business cycle. Removal of these short-term fluctuations reveals long-term trends. This can help with economic or other forecasting associated with the [business cycle](https://www.investopedia.com/terms/b/businesscycle.asp).

### Key Takeaways

*   The Hodrick-Prescott filter refers to a data-smoothing technique used primarily in macroeconomics.
*   It is commonly applied during analysis to remove short-term fluctuations associated with the business cycle.
*   In practice, it is used to smooth and detrend the Conference Board's Help Wanted Index so it can be benchmarked against the Bureau of Labor Statistic's JOLTS, which measures job vacancies in the U.S.

## Understanding the Hodrick-Prescott (HP) Filter

The Hodrick-Prescott (HP) filter is a tool commonly used in [macroeconomics](https://www.investopedia.com/terms/m/macroeconomics.asp). It is named after economists Robert Hodrick and Edward Prescott who first popularized this filter in economics in the 1990s. Hodrick was an economist who specialized in international finance. Prescott won the Nobel Memorial Prize, sharing it with another economist for their research in macroeconomics.

This filter determines the long-term trend of a time series by discounting the importance of short-term price fluctuations. In practice, the filter is used to smooth and detrend the Conference Board's Help Wanted Index (HWI) so it can be benchmarked against the [Bureau of Labor Statistic's](https://www.investopedia.com/terms/b/bls.asp) (BLS) JOLTS, an economic data series that may more accurately measure job vacancies in the U.S.

> **Important**
>
> The HP filter is a tool commonly used in macroeconomics.

## Special Considerations

The HP filter is one of the most widely used tools in macroeconomic analysis. It tends to have favorable results if the noise is distributed normally, and when the analysis being conducted is historical.

According to a paper published by economist and professor James Hamilton—which appears on the National Bureau of Economic Research [website](https://www.nber.org/papers/w23429)—there are several reasons why the HP filter should not be used. Hamilton first proposes that the filer produces outcomes that have no basis in the process of generating data. He also states that the values that are filtered at the sample's end are totally different from those in the middle.
# Group of 11 (G11): What it Means, How it Works

## What Is Group of 11?

The Group of 11 (G-11) is a group of developing countries created to ease members' debt burdens to direct their resources to economic development. The G-11 came into existence on Sept. 20, 2006, and was initially conceived by King Abdullah of Jordan. The group is mainly made up of lower-middle-income countries.

The G11 member countries are Croatia, Ecuador, El Salvador, Georgia, Honduras, Indonesia, Jordan, Morocco, Pakistan, Paraguay, and Sri Lanka. Originally, Tunisia was part of the original 11 but was replaced by El Salvador by 2007.

## Understanding Group of 11 (G11)

The Group of 11 (G-11) member countries believe that their debt hinders their development in that it consumes much of their [export](https://www.investopedia.com/terms/e/export.asp) earnings and fiscal revenues. They believe it is in the interest of more developed countries that their debt is written off and/or converted into assistance for economic development projects.

In addition, tariffs imposed by the G-7 and other developed countries also hamper the growth of national income and the improvement of living standards, which often pursue development via export-led growth. The group, therefore, also seeks to work with member countries of the [Group of Seven (G-7)](https://www.investopedia.com/terms/g/g7.asp) for increased market access, lower tariffs, and investment. G-11 members believe that the international donor community can help accelerate global peace and security by helping those countries achieve sustained economic growth.

> **Article Sources**
>
> 1.  King Abdullah II of Jordan. "[His Majesty King Abdullah II Opens the Group of 11/Lower-Middle Income Countries Summit](https://kingabdullah.jo/en/news/his-majesty-king-abdullah-ii-opens-group-11lower-middle-income-countries-summit)." Accessed Aug. 30, 2021.
>     
> 2.  King Abdullah II of Jordan. "[King Urges New Development Partnership](https://kingabdullah.jo/en/news/king-urges-new-development-partnership)." Accessed Aug. 30, 2021.
>     
> 3.  King Abdullah of Jordan II. "[King Urges Developed Countries to Support Development](https://kingabdullah.jo/en/news/king-urges-developed-countries-support-development)." Accessed Aug. 30, 2021.