1. In
charting, the theoretical trend of a country's
trade balance after the
devaluation of its
currency. After a devaluation in currency, there is often a slight increase in the
trade deficit, but the long-term effect is a
trade surplus due to the fact that a good sold in a devalued currency makes a good less
expensive for international
buyers. This is represented graphically as a curve that briefly dips below the x-axis, representing time, before turning upwards, resembling the letter J. On this graph, the y-axis represents the trade balance.
2. In
equity funds, the theoretical trend of the
internal rate of return over several years. Most funds operate at a
loss at their beginning, due in part to their
start-up costs. Later, if the fund is successful, the internal rate of return rises significantly. This is represented graphically as a curve that briefly dips below the x-axis, representing time, before turning upwards, resembling the letter J. On this graph, the y-axis represents the internal rate of return.