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Rebalancing |
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Definition of RebalancingRebalancingRealigning the proportions of assets in a portfolio as needed.
Related Terms:Leverage rebalancingMaking transactions to adjust (rebalance) a firm's leverage ratio back to its target. Index Portfolio Rebalancing Service (IPRS)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. Dynamic hedgingA strategy that involves rebalancing hedge positions as market conditions change; a Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Arms indexAlso known as a trading index (TRIN)= (number of advancing issues)/ (number of declining Bond indexingDesigning a portfolio so that its performance will match the performance of some bond index. Buying the indexPurchasing the stocks in the S&P 500 in the same proportion as the index to achieve the Complete portfolioThe entire portfolio, including risky and risk-free assets. Concentration servicesMovement of cash from different lockbox locations into a single concentration Consumer Price Index (CPI)The CPI, as it is called, measures the prices of consumer goods and services and is a Debt leverageThe amplification of the return earned on equity when an investment or firm is financed Debt serviceInterest payment plus repayments of principal to creditors, that is, retirement of debt. Debt service parity approachAn analysis wherein the alternatives under consideration will provide the firm Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Dedicating a portfolioRelated: cash flow matching. EAFE indexThe European, Australian, and Far East stock index, computed by Morgan Stanley. Efficient portfolioA portfolio that provides the greatest expected return for a given level of risk (i.e. standard Enhanced indexingAlso called indexing plus, an indexing strategy whose objective is to exceed or replicate Excess return on the market portfolioThe difference between the return on the market portfolio and the Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of Feasible portfolioA portfolio that an investor can construct given the assets available. Feasible set of portfoliosThe collection of all feasible portfolios. Financial leverageUse of debt to increase the expected return on equity. Financial leverage is measured by Financial leverage clienteleA group of investors who have a preference for investing in firms that adhere to Financial leverage ratiosRelated: capitalization ratios. Full-service leaseAlso called rental lease. Lease in which the lessor promises to maintain and insure the Hedged portfolioA 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. Homemade leverageIdea 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 Index arbitrageAn investment/trading strategy that exploits divergences between actual and theoretical Index fundInvestment fund designed to match the returns on a stockmarket index. Index modelA model of stock returns using a market index such as the S&P 500 to represent common or Index optionA call or put option based on a stock market index. Index warrantA stock index option issued by either a corporate or sovereign entity as part of a security Indexed bondBond whose payments are linked to an index, e.g. the consumer price index. IndexingA passive instrument strategy consisting of the construction of a portfolio of stocks designed to Information servicesOrganizations that furnish investment and other types of information, such as Jensen indexAn index that uses the capital asset pricing model to determine whether a money manager LeverageThe use of debt financing. Leverage clienteleA group of shareholders who, because of their personal leverage, seek to invest in Leverage ratiosMeasures of the relative contribution of stockholders and creditors, and of the firm's ability Leveraged betaThe 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 Leveraged equityStock in a firm that relies on financial leverage. Holders of leveraged equity face the Leveraged leaseA lease arrangement under which the lessor borrows a large proportion of the funds needed Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Leveragehe use of debt financing. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Market portfolioA portfolio consisting of all assets available to investors, with each asset held -in Market value-weighted indexAn index of a group of securities computed by calculating a weighted average Markowitz efficient portfolioAlso called a mean-variance efficient portfolio, a portfolio that has the highest Markowitz efficient set of portfoliosThe collection of all efficient portfolios, graphically referred to as the Mean-variance efficient portfolioRelated: Markowitz efficient portfolio Minimum-variance portfolioThe portfolio of risky assets with lowest variance. Modern portfolio theoryPrinciples underlying the analysis and evaluation of rational portfolio choices Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Non-financial servicesInclude such things as freight, insurance, passenger services, and travel. Normal portfolioA customized benchmark that includes all the securities from which a manager normally Operating leverageFixed operating costs, so-called because they accentuate variations in profits. Optimal portfolioAn efficient portfolio most preferred by an investor because its risk/reward characteristics Optimization approach to indexingAn approach to indexing which seeks to Optimize some objective, such Passive portfolio strategyA strategy that involves minimal expectational input, and instead relies on Passive portfolioA market index portfolio. PortfolioA collection of investments, real and/or financial. Portfolio insuranceA strategy using a leveraged portfolio in the underlying stock to create a synthetic put Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Portfolio opportunity setThe expected return/standard deviation pairs of all portfolios that can be Portfolio managementRelated: Investment management Portfolio managerRelated: Investment manager Portfolio separation theoremAn investor's choice of a risky investment portfolio is separate from his Portfolio turnover rateFor an investment company, an annualized rate found by dividing the lesser of Portfolio varianceWeighted sum of the covariance and variances of the assets in a portfolio. Profitability indexThe present value of the future cash flows divided by the initial investment. Also called Pure index fundA portfolio that is managed so as to perfectly replicate the performance of the market portfolio. Replicating portfolioA portfolio constructed to match an index or benchmark. Risk indexesCategories of risk used to calculate fundamental beta, including (1) market variability, (2) Short-term investment servicesservices that assist firms in making short-term investments. Single index modelA model of stock returns that decomposes influences on returns into a systematic factor, Single-index modelRelated: market model Stock index optionAn option in which the underlying is a common stock index. Stratified equity indexingA method of constructing a replicating portfolio in which the stocks in the index Stratified sampling approach to indexingAn approach in which the index is divided into cells, each Stratified sampling bond indexingA method of bond indexing that divides the index into cells, each cell Strike indexFor a stock index option, the index value at which the buyer of the option can buy or sell the Structured portfolio strategyA strategy in which a portfolio is designed to achieve the performance of some Tilted portfolioAn indexing strategy that is linked to active management through the emphasis of a Treynor IndexA measure of the excess return per unit of risk, where excess return is defined as the Unleveraged betaThe beta of an unleveraged required return (i.e. no debt) on an investment when the Unleveraged required returnThe required return on an investment when the investment is financed entirely Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. Well diversified portfolioA portfolio spread out over many securities in such a way that the weight in any Zero-beta portfolioA portfolio constructed to represent the risk-free asset, that is, having a beta of zero. Zero-investment portfolioA portfolio of zero net value established by buying and shorting component Product/service mixSee sales mix. Profitability indexSee cash value added. financial leverageThe equity (ownership) capital of a business can serve operating leverageA relatively small percent increase or decrease in PortfolioA collection of securities and investments held by an investor Portfolio DiversificationSee diversification Portfolio WeightThe percentage of a total portfolio represented by a single specific
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