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Definition of Index
A series of numbers measuring percentage changes over time from a base period. The index number for the base period is by convention set equal to 100.
An index is a statistical measure of a market based on the performance of a sample of securities in that market. For example, the S&P/TSX Composite index reflects the performance of the most actively traded stocks on The Toronto Stock Exchange.
Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
Designing a portfolio so that its performance will match the performance of some bond index.
Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
The CPI, as it is called, measures the prices of consumer goods and services and is a
An index calculated by tracking the cost of a typical bundle of consumer goods and services over time. It is commonly used to measure inflation.
The European, Australian, and Far East stock index, computed by Morgan Stanley.
Also called indexing plus, an indexing strategy whose objective is to exceed or replicate
A division of the CME established in 1982 for trading stock index
An investment/trading strategy that exploits divergences between actual and theoretical
Investment fund designed to match the returns on a stockmarket index.
Mutual funds that aim to track the performance of a specific stock or bond index. This process is also referred to as indexing and passive management.
A model of stock returns using a market index such as the S&P 500 to represent common or
A call or put option based on a stock market index.
index Portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually.
A stock index option issued by either a corporate or sovereign entity as part of a security
The adjustment of benefits to compensate for the effects of inflation.
Bond whose payments are linked to an index, e.g. the consumer price index.
A passive instrument strategy consisting of the construction of a portfolio of stocks designed to
An index that uses the capital asset pricing model to determine whether a money manager
Measure of the investment performance of the overall market.
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Optimization approach to indexing
An approach to indexing which seeks to Optimize some objective, such
present value index
see profitability index
A measure of the price level calculated by comparing the cost of a bundle of goods and services in a given year with its cost in a base year. See also index.
The present value of the future cash flows divided by the initial investment. Also called
See cash value added.
A method for determining the profitability of an investment. It is
Ratio of net present value to initial investment.
profitability index (Pl)
a ratio that compares the present value of net cash flows to the present value of the net investment
Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.
Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
Single index model
A model of stock returns that decomposes influences on returns into a systematic factor,
Related: market model
Standard & Poor’s Composite Index
index of the investment performance of a portfolio of 500 large stocks. Also called the
Stock index option
An option in which the underlying is a common stock index.
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Stratified sampling approach to indexing
An approach in which the index is divided into cells, each
Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell
For a stock index option, the index value at which the buyer of the option can buy or sell the
A measure of the excess return per unit of risk, where excess return is defined as the
A measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A
Adjustable rate mortgage. A mortgage that features predetermined adjustments of the loan interest rate
The reference year when constructing a price index. By tradition it is given the value 100.
The performance of a predetermined set of securities, for comparison purposes. Such sets may be
The price volatility of a financial instrument relative to the price
Beta equation (Mutual Funds)
The beta of a fund is determined as follows:
Beta equation (Stocks)
The beta of a stock is determined as follows:
Beta (Mutual Funds)
The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means
Bull CD, Bear CD
A bull CD pays its holder a specified percentage of the increase in return on a specified
A method of constructing a replicating portfolio in which the manager purchases a
Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving
Constant dollar accounting
A method for restating financial statements by reducing or
The net present value of an investment divided by the investment's initial cost. Also called
A price index used to deflate a nominal value to a real value by dividing the nominal value by the price deflator.
Difference from S&P
A mutual fund's return minus the change in the Standard & Poors 500 index for the
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
Dow Jones Industrial Average
index of the investment performance of a portfolio of 30 “blue-chip” stocks.
A swap in which the cash flows that are exchanged are based on the total return on some stock
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
European Currency Unit (ECU)
An index of foreign exchange consisting of about 10 European currencies,
The return expected on a risky asset based on a probability distribution for the possible rates
In the model for calculating fundamental beta, ratios in risk indexes other than
Futures contract multiple
A constant, set by an exchange, which when multiplied by the futures price gives
Price index used to deflate nominal GDP to real GDP by dividing nominal GDP by the GDP deflator.
This relationship is sometimes called the single-index model. The market model says that the
Portfolio of all assets in the economy. In practice a broad stock market index, such as the Standard & Poor's Composite, is used to represent the market.
Mutual fund theorem
A result associated with the CAPM, asserting that investors will choose to invest their
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
A market index portfolio.
Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on
A weighted average of prices of all goods and services where the weights are given by total spending on each good or service. Measured by a price index.
GDP expressed in base-year dollars, calculated by dividing nominal GDP by a price index.
Income expressed in base-year dollars, calculated by dividing nominal income by a price index.
Real Money Supply
Money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.
Wage expressed in base-year dollars, calculated by dividing the money wage by a price index.
A stock's price movement over the past year as compared to a market index (the S&P 500).
A portfolio constructed to match an index or benchmark.
1) Parts of stock returns not explained by the explanatory variable (the market-index return). They
Abbreviation for Standard & Poor’s stockmarket index.
A statistically created benchmark that adjusts for a managers' index-like tendencies.
A measure of a portfolio's excess return relative to the total variability of the portfolio. Related:
Terms of Trade
The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.
An indexing strategy that is linked to active management through the emphasis of a
In an indexing strategy, the difference between the performance of the benchmark and the
Triple witching hour
The four times a year that the S&P futures contract expires at the same time as the S&P
Variance minimization approach to tracking
An approach to bond indexing that uses historical data to
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