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Definition of Zero-investment portfolio

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Zero-investment portfolio

A portfolio of zero net value established by buying and shorting component
securities, usually in the context of an arbitrage strategy.



Related Terms:

Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy


Business Expansion Investment

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.


capital investment analysis

Refers to various techniques and procedures
used to determine or to analyze future returns from an investment
of capital in order to evaluate the capital recovery pattern and the
periodic earnings from the investment. The two basic tools for capital
investment analysis are (1) spreadsheet models (which I strongly prefer)
and (2) mathematical equations for calculating the present value or
internal rate of return of an investment. Mathematical methods suffer
from a lack of information that the decision maker ought to consider. A
spreadsheet model supplies all the needed information and has other
advantages as well.


Capital Investments

Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.


Complete portfolio

The entire portfolio, including risky and risk-free assets.



Dedicating a portfolio

Related: cash flow matching.


Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.


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Efficient portfolio

A portfolio that provides the greatest expected return for a given level of risk (i.e. standard
deviation), or equivalently, the lowest risk for a given expected return.
Efficient set Graph representing a set of portfolios that maximize expected return at each level of portfolio
risk.


Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.


Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.


Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.


Factor portfolio

A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of
zero on any other factors.


Feasible portfolio

A portfolio that an investor can construct given the assets available.


Feasible set of portfolios

The collection of all feasible portfolios.


Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.


Future investment opportunities

The options to identify additional, more valuable investment opportunities
in the future that result from a current opportunity or operation.


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guaranteed investment certificate (GIC)

A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions.


Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.



Hedged portfolio

A portfolio consisting of the long position in the stock and the short position in the call
option, so as to be riskless and produce a return that equals the risk-free interest rate.


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.


Investment

The commitment of funds (capital) in anticipation of an increased
return of funds at some point in the future


Investment analysts

Related: financial analysts


Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.


Investment Banker

Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.


investment center

a responsibility center in which the manager
is responsible for generating revenues and planning
and controlling expenses and has the authority to acquire,
dispose of, and use plant assets to earn the highest rate
of return feasible on those assets within the confines and
to the support of the organization’s goals


Investment centre

A division or unit of an organization that is responsible for achieving an adequate return on
the capital invested in the division or unit.


investment decision

a judgment about which assets will be
acquired by an entity to achieve its stated objectives


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Investment decisions

Decisions concerning the asset side of a firm's balance sheet, such as the decision to
offer a new product.



investment grade

Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.


Investment grade bonds

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.


Investment income

The revenue from a portfolio of invested assets.
investment management Also called portfolio management and money management, the process of
managing money.


Investment manager

Also called a portfolio manager and money manager, the individual who manages a
portfolio of investments.


Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).


Investment Spending

Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.


Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).


Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.


Investment trust

A closed-end fund regulated by the investment Company Act of 1940. These funds have a
fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market
price may exceed the net asset value per share, in which case it is considered at a "premium." When the
market price falls below the NAV/share, it is at a "discount." Many closed-end funds are of a specialized
nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US
and foreign exchanges.


Investment value

Related:straight value.


Investments

As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
viewpoint. This area deals with the firm's financing decision, but from the other side of the transaction.


Legal investments

investments that a regulated entity is permitted to make under the rules and regulations
that govern its investing.


Leveraged portfolio

A portfolio that includes risky assets purchased with funds borrowed.


Leveraged portfolio

A portfolio that includes risky assets purchased with funds borrowed.


Market portfolio

A portfolio consisting of all assets available to investors, with each asset held -in
proportion to its market value relative to the total market value of all assets.


market portfolio

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.


Market Portfolio

The total of all investment opportunities available to the investor.


Markowitz efficient portfolio

Also called a mean-variance efficient portfolio, a portfolio that has the highest
expected return at a given level of risk.


Markowitz efficient set of portfolios

The collection of all efficient portfolios, graphically referred to as the
Markowitz efficient frontier.


Mean-variance efficient portfolio

Related: Markowitz efficient portfolio


Minimum-variance portfolio

The portfolio of risky assets with lowest variance.
Minority interest An outside ownership interest in a subsidiary that is consolidated with the parent for
financial reporting purposes.


Modern portfolio theory

Principles underlying the analysis and evaluation of rational portfolio choices
based on risk-return trade-offs and efficient diversification.


Mutually exclusive investment decisions

investment decisions in which the acceptance of a project
precludes the acceptance of one or more alternative projects.


Net investment

Gross, or total, investment minus depreciation.


Net Investment

investment spending minus depreciation.


Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.


Normal portfolio

A customized benchmark that includes all the securities from which a manager normally
chooses, weighted as the manager would weight them in a portfolio.


Optimal portfolio

An efficient portfolio most preferred by an investor because its risk/reward characteristics
approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect
to return and risk.


Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.


Passive investment strategy

See: passive management.


Passive portfolio

A market index portfolio.


Passive portfolio strategy

A strategy that involves minimal expectational input, and instead relies on
diversification to match the performance of some market index. A passive strategy assumes that the
marketplace will reflect all available information in the price paid for securities, and therefore, does not
attempt to find mispriced securities. Related: active portfolio strategy


Portfolio

A collection of investments, real and/or financial.


Portfolio

A collection of securities and investments held by an investor


Portfolio Diversification

See diversification


Portfolio insurance

A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.


Portfolio internal rate of return

The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.


Portfolio management

Related: investment management


Portfolio manager

Related: investment manager


Portfolio opportunity set

The expected return/standard deviation pairs of all portfolios that can be
constructed from a given set of assets.


Portfolio separation theorem

An investor's choice of a risky investment portfolio is separate from his
attitude towards risk. Related:Fisher's separation theorem.


Portfolio turnover rate

For an investment company, an annualized rate found by dividing the lesser of
purchases and sales by the average of portfolio assets.


Portfolio variance

Weighted sum of the covariance and variances of the assets in a portfolio.


Portfolio Weight

The percentage of a total portfolio represented by a single specific
security. It is calculated by dividing the value of the investment in a
specific security by the value of the investment in the total portfolio.


postinvestment audit

the process of gathering information
on the actual results of a capital project and comparing
them to the expected results


qualified investments (Canada)

Qualified investments is the term used for investments that can be held in an RSP. These investments generally include:
Canadian dollar savings accounts, guaranteed investment certificates, term deposits
shares of Canadian and foreign companies listed on a prescribed stock exchange
shares of some over-the-counter U.S. and Canadian companies
shares of some small businesses
certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds
certain types of mortgages, including your own
certain covered call options, warrants and rights
certain mutual funds


Regular Investment Plan (RIP)

A plan under which you may make regular deposits of the same amount to your Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose.


reinvestment assumption

an assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR


Reinvestment rate

The rate at which an investor assumes interest payments made on a debt security can be
reinvested over the life of that security.


Reinvestment risk

The risk that proceeds received in the future will have to be reinvested at a lower potential
interest rate.


REIT (real estate investment trust)

Real estate investment trust, which is similar to a closed-end mutual
fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.


REMIC (real estate mortgage investment conduit)

A pass-through tax entity that can hold mortgages
secured by any type of real property and issue multiple classes of ownership interests to investors in the form
of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform
Act of 1986.


Replicating portfolio

A portfolio constructed to match an index or benchmark.


return on investment

a ratio that relates income generated
by an investment center to the resources (or asset base)
used to produce that income


Return on investment (ROI)

Generally, book income as a proportion of net book value.


RETURN ON INVESTMENT (ROI)

In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole.


Return on investment (ROI)

The net profit after tax as a percentage of the shareholders’ investment in the business.


return on investment (ROI)

A very general concept that refers to some
measure of income, earnings, profit, or gain over a period of time
divided by the amount of capital invested during the period. It is almost
always expressed as a percent. For a business, an important ROI measure
is its return on equity (ROE), which is computed by dividing its net
income for the period by its owners’ equity during the period.


Short-term investment services

Services that assist firms in making short-term investments.


Structured portfolio strategy

A strategy in which a portfolio is designed to achieve the performance of some
predetermined liabilities that must be paid out in the future.


Tilted portfolio

An indexing strategy that is linked to active management through the emphasis of a
particular industry sector, selected performance factors such as earnings momentum, dividend yield, priceearnings
ratio, or selected economic factors such as interest rates and inflation.


Underinvestment problem

The mirror image of the asset substitution problem, wherein stockholders refuse
to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders.
Underlying
The "something" that the parties agree to exchange in a derivative contract.


Unit investment trust

Money invested in a portfolio whose composition is fixed for the life of the fund.
Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium above net asset value.


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
security is small. The risk of a well-diversified portfolio closely approximates the systemic risk of the overall
market, the unsystematic risk of each security having been diversified out of the portfolio.


zero-balance account

Regional bank account to which just enough funds are transferred daily to pay each day’s bills.


Zero-balance account (ZBA)

A checking account in which zero balance is maintained by transfers of funds
from a master account in an amount only large enough to cover checks presented.


zero-base budgeting

a comprehensive budgeting process
that systematically considers the priorities and alternatives
for current and proposed activities in relation to organization
objectives; it requires the rejustification of ongoing activities


Zero-based budgeting

A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.


Zero-beta portfolio

A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.


Zero coupon bond

Such a debt security pays an investor no interest. It is sold at a discount to its face price
and matures in one year or longer.



 

 

 

 

 

 

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