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Definition of Rebalancing
Realigning the proportions of assets in a portfolio as needed.
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.
Making transactions to adjust (rebalance) a firm's leverage ratio back to its target.
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
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 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.
Earnings before interest and income taxes plus one-third rental charges, divided
An analysis wherein the alternatives under consideration will provide the firm
Dedicating a portfolio
Related: cash flow matching.
degree of operating leverage
a factor that indicates how a percentage change in sales, from the existing or current
degree of operating leverage (DOL)
Percentage change in profits given a 1 percent change in sales.
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
The equity (ownership) capital of a business can serve
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
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
grade (of product or service)
the addition or removal of product
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
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.
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.
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.
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
Organizations that furnish investment and other types of information, such as
Internal Revenue Service
A federal agency empowered by Congress to interpret and enforce tax-related laws.
An index that uses the capital asset pricing model to determine whether a money manager
The use of debt financing.
he use of debt financing.
The relationship between interest bearing debt and equity in a company(financial leverage) or the effect of fixed expense on after tax earnings(operating leverage).
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
The purchase of one business entity by another, largely using borrowed
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use
leveraged buyout (LBO)
Acquisition of the firm by a private group using substantial borrowed funds.
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.
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.
Measure of the investment performance of the overall market.
A portfolio consisting of all assets available to investors, with each asset held -in
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.
The total of all investment opportunities available to the investor.
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
McNamara-O'Hara Service Contract Act of 1965
A federal Act requiring federal contractors to pay those employees working on a federal contract at
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.
A relatively small percent increase or decrease in
the proportionate relationship between
Degree to which costs are fixed.
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
A market index portfolio.
Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on
A collection of investments, real and/or financial.
A collection of securities and investments held by an investor
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
Related: Investment management
Related: Investment manager
Portfolio opportunity set
The expected return/standard deviation pairs of all portfolios that can be
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 percentage of a total portfolio represented by a single specific
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.
See sales mix.
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