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Definition of Bogey
The level of earnings in an incentive compensation or bonus plan below which no incentive
The return an investment manager is compared to for performance evaluation.
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
Part of the return that is not due to systematic influences (market wide influences). In
earnings of a firm as reported on its income statement.
Money after-tax rate of return minus the inflation rate.
The annual rate of return that when compounded t times, would have
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns
The average project earnings after taxes and depreciation divided by the average
The ratio of the average cash inflow to the amount invested.
A plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor
A method developed by BARRA, a consulting firm in
A devaluation that is designed to cheapen a nation's currency and thereby
The Association for investment Management and Research (AIMR)'s performance Presentation Standards Implementation
The degree of assurance that a specified failure rate is not exceeded.
Financial planning conducted by a firm that encompasses preparation of both
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the
Defined benefit plan
A pension plan in which the sponsor agrees to make specified dollar payments to
Defined contribution plan
A pension plan in which the sponsor is responsible only for making specified
Devaluation A decrease in the spot price of the currency
Withdrawal of funds from a financial institution in order to invest them directly.
Dividend reinvestment plan (DRP)
Automatic reinvestment of shareholder dividends in more shares of a
The return realized on a portfolio for any evaluation period, including (1) the change in market
Dollar-weighted rate of return
Also called the internal rate of return, the interest rate that will make the
Net income for the company during the period.
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings per share (EPS)
EPS, as it is called, is a company's profit divided by its number of outstanding
Earnings retention ratio
Positive or negative differences from the consensus forecast of earnings by institutions
The ratio of earnings per share after allowing for tax and interest payments on fixed interest
The real flow of cash that a firm could pay out forever in the absence of any change in
Employee stock ownership plan (ESOP)
A company contributes to a trust fund that buys stock on behalf of
An agreement in which one party agrees to pay the other at specific time periods if a specific
The time interval over which a money manager's performance is evaluated.
Ex post return
Related: Holding period return
The expected return of a portfolio based on the expected returns of its component assets and
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Also called abnormal returns, returns in excess of those required by some asset pricing model.
Expected future return
The return that is expected to be earned on an asset in the future. Also called the
The return expected on a risky asset based on a probability distribution for the possible rates
Expected return on investment
The return one can expect to earn on an investment. See: capital asset
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be
Institutions that provide the market function of matching borrowers and lenders or
A financial blueprint for the financial future of a firm.
The process of evaluating the investing and financing options available to a firm. It
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest.
A member who is paid a fee for executing orders for clearing members or their customers. A
Arrangement used to finance inventory. A finance company buys the inventory, which is then
A member who generally trades only for his own account, for an account controlled by him or
Foreign direct investment (FDI)
The acquisition abroad of physical assets such as plant and equipment, with
Fully diluted earnings per shares
earnings per share expressed as if all outstanding convertible securities
Future investment opportunities
The options to identify additional, more valuable investment opportunities
Geometric mean return
Also called the time weighted rate of return, a measure of the compounded rate of
Group rotation manager
A top-down manager who infers the phases of the business cycle and allocates
A money manager who seeks to buy stocks that are typically selling at relatively high P/E
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
Holding period return
The rate of return over a given period.
Total return over a given horizon.
Incremental internal rate of return
IRR on the incremental investment from choosing a large project
Defined benefit pension plans that are guaranteed by life insurance products. Related: noninsured plans
Interest rate floor
An interest rate agreement in which payments are made when the reference rate falls
Typically 1-10 years.
investment through a financial institution. Related: disintermediation.
Internal rate of return
Dollar-weighted rate of return. Discount rate at which net present value (NPV)
Related: financial analysts
Financial intermediaries who perform a variety of services, including aiding in the sale of
Decisions concerning the asset side of a firm's balance sheet, such as the decision to
Investment grade bonds
A bond that is assigned a rating in the top four categories by commercial credit
The revenue from a portfolio of invested assets.
Also called a portfolio manager and money manager, the individual who manages a
Investment product line (IPML)
The line of required returns for investment projects as a function of beta
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
A closed-end fund regulated by the investment Company Act of 1940. These funds have a
As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
The commercial or investment bank with the primary responsibility for organizing syndicated
investments that a regulated entity is permitted to make under the rules and regulations
The characteristic of the scheduled principal and interest payments due under a mortgage such that
Bond with a stream of coupon payments that are the same throughout the life of the bond.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
Long-term financial plan
Financial plan covering two or more years of future operations.
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to
Decisions concerning the operation of the firm, such as the choice of firm size, firm
The return on the market portfolio.
Materials requirement planning
Computer-based systems that plan backward from the production schedule
Related: investment manager.
Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and
Money rate of return
Annual money return as a percentage of asset value.
Multiple rates of return
More than one rate of return from the same project that make the net present value
Mutually exclusive investment decisions
investment decisions in which the acceptance of a project
Gross, or total, investment minus depreciation.
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Defined benefit pension plans that are not guaranteed by life insurance products. Related:
Overfunded pension plan
A pension plan that has a positive surplus (i.e., assets exceed liabilities).
Passive investment strategy
See: passive management.
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
A fund that is established for the payment of retirement benefits.
Performance attribution analysis
The decomposition of a money manager's performance results to explain
The evaluation of a manager's performance which involves, first, determining
The calculation of the return realized by a money manager over some time interval.
Shares of stock given to managers on the basis of performance as measured by earnings
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