of inflation The public's expectations for inflation. These expectations determine how large an effect a given policy action by the Fed will have on economic activity. Excess kurtosis Kurtosis measures the "fatness" of the tails of a distribution. Positive excess kurtosis means that distribution has fatter tails than a normal distribution. Fat tails means there is a higher than normal probability of big positive and negative returns realizations. When calculating kurtosis, a result of +3.00 indicates the absence of kurtosis (distribution is mesokurtic). For simplicity in its interpretation, some statisticians adjust this result to zero (i.e. kurtosis minus 3 equals zero), and then any reading other than zero is referred to as excess kurtosis. Negative numbers indicate a platykurtic distribution; positive numbers indicate a leptokurtic distribution. Excess margin Equity present in an individual's account above the legal minimum required for a margin account or the maintenance requirement at a brokerage firm. Excess profits tax Additional federal taxes placed on the earnings of a business, used only in time of national emergency such as war. Excess reserves Actual reserves that exceed required reserves. Excess return on the market portfolio Difference between the return on the market portfolio and the riskless rate. Excess returns Difference between an asset's return and the riskless rate. Sometimes confused with abnormal returns, returns in excess of those required by some asset pricing model. Exchange A marketplace in which shares, options and futures on stocks, bonds, commodities, and indexes are traded. Principal U.S. stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and National Association of Securities Dealers Automatic Quotation System (Nasdaq). Exchange, The A nickname for the New York Stock Exchange. Also known as the Big Board, where more than 2000 common and preferredstocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City. Exchange of assets Acquisition of another company by purchase of its assets in exchange for cash or stock. Exchange controls Government restrictions on the purchase of foreign currencies by domestic citizens or on the purchase of the local domestic currency by foreigners. Exchange distribution A sale on an exchangefloor of a large block of stock in a single transaction. A brokerbunches a large number of buy orders and sells the block all at once. The broker receives a special commission from the seller. Exchange fund (also known as swap fund) Investment vehicle introduced in 1999 that appeals to wealthy investors with large holdings in a single stock who want to diversify without paying capital gains taxes. These funds allow investors to exchange their stock for shares in a diversified portfolio of stocks in a tax-free transaction. Exchange members See: Member firm; seat Exchange offer An offer by a firm to give one security, such as a bond or preferred stock, in exchange for another security, such as shares of common stock. Exchange privilege A mutual fundshareholder's right to switch from one fund to another within one fund family, usually at no additional charge. Exchange