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Definition of Rebalancing
Realigning the proportions of assets in a portfolio as needed.
Making transactions to adjust (rebalance) a firm's leverage ratio back to its target.
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 strategy that involves rebalancing hedge positions as market conditions change; a
A strategy that uses available information and forecasting techniques to seek a
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 entire portfolio, including risky and risk-free assets.
Movement of cash from different lockbox locations into a single concentration
The CPI, as it is called, measures the prices of consumer goods and services and is a
The amplification of the return earned on equity when an investment or firm is financed
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
An analysis wherein the alternatives under consideration will provide the firm
Earnings before interest and income taxes plus one-third rental charges, divided
Related: cash flow matching.
The European, Australian, and Far East stock index, computed by Morgan Stanley.
A portfolio that provides the greatest expected return for a given level of risk (i.e. standard
Also called indexing plus, an indexing strategy whose objective is to exceed or replicate
Excess return on the market portfolio
The difference between the return on the market portfolio and the
A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of
A portfolio that an investor can construct given the assets available.
Feasible set of portfolios
The collection of all feasible portfolios.
Use of debt to increase the expected return on equity. Financial leverage is measured by
Financial leverage clientele
A group of investors who have a preference for investing in firms that adhere to
Financial leverage ratios
Related: capitalization ratios.
Also called rental lease. Lease in which the lessor promises to maintain and insure the
A portfolio consisting of the long position in the stock and the short position in the call
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
Index and Option Market (IOM)
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.
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.
A stock index option issued by either a corporate or sovereign entity as part of a security
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
Organizations that furnish investment and other types of information, such as
An index that uses the capital asset pricing model to determine whether a money manager
The use of debt financing.
A group of shareholders who, because of their personal leverage, seek to invest in
Measures of the relative contribution of stockholders and creditors, and of the firm's ability
The beta of a leveraged required return; that is, the beta as adjusted for the degree of
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
A lease arrangement under which the lessor borrows a large proportion of the funds needed
A portfolio that includes risky assets purchased with funds borrowed.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
he use of debt financing.
A portfolio that includes risky assets purchased with funds borrowed.
A portfolio consisting of all assets available to investors, with each asset held -in
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Markowitz efficient portfolio
Also called a mean-variance efficient portfolio, a portfolio that has the highest
Markowitz efficient set of portfolios
The collection of all efficient portfolios, graphically referred to as the
Mean-variance efficient portfolio
Related: Markowitz efficient portfolio
The portfolio of risky assets with lowest variance.
Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
Include such things as freight, insurance, passenger services, and travel.
A customized benchmark that includes all the securities from which a manager normally
Fixed operating costs, so-called because they accentuate variations in profits.
An efficient portfolio most preferred by an investor because its risk/reward characteristics
Optimization approach to indexing
An approach to indexing which seeks to Optimize some objective, such
Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on
A market index portfolio.
A collection of investments, real and/or financial.
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the
Portfolio opportunity set
The expected return/standard deviation pairs of all portfolios that can be
Related: Investment management
Related: Investment manager
Portfolio separation theorem
An investor's choice of a risky investment portfolio is separate from his
Portfolio turnover rate
For an investment company, an annualized rate found by dividing the lesser of
Weighted sum of the covariance and variances of the assets in a portfolio.
The present value of the future cash flows divided by the initial investment. Also called
Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.
A portfolio constructed to match an index or benchmark.
Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
Short-term investment services
services that assist firms in making short-term investments.
Single index model
A model of stock returns that decomposes influences on returns into a systematic factor,
Related: market model
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
Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some
An indexing strategy that is linked to active management through the emphasis of a
A measure of the excess return per unit of risk, where excess return is defined as the
The beta of an unleveraged required return (i.e. no debt) on an investment when the
Unleveraged required return
The required return on an investment when the investment is financed entirely
Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.
Well diversified portfolio
A portfolio spread out over many securities in such a way that the weight in any
A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.
A portfolio of zero net value established by buying and shorting component
See sales mix.
See cash value added.
The equity (ownership) capital of a business can serve
A relatively small percent increase or decrease in
A collection of securities and investments held by an investor
The percentage of a total portfolio represented by a single specific
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