Investments Ch 4-6

30 terms by eeeeee

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NAV

net A value = (MV A-L / Shares Outstanding)

unit investment trusts

$ pooled from many investors, invested in FIXED portfolio for the life of the fund

open-end fund

fund that issues / redeems its shares at NAV

closed-end fund

shares may not be redeemed, instead they're traded at P that can differ from NAV

load

sales commission on mutual fund

hedge fund

private investment pool, wealthy / institutional investors, exempt from SEC, therefore can take more chances that mutual funds

funds of funds

mutual funds that invest in OTHER mutual funds

12b-1 fees

annual fees, charged by mutual fund, pays for marketing / distributing costs

soft dollars

value of research services that brokerages provide "for free" in exchange for the investment manager's business

turnover

ratio, trading activity of portfolio: A of portfolio

ETF

kind of like mutual funds, allows investors to trade in index portfolios

HPR

(ending P - beg P + cash dividend / beg P)

VaR

value at risk, measure of downside risk, worst loss that will be suffered w/ a given probability, often 5%

risk premium

expected return in excess of that on risk-free securities

excess return

rate of return beyond the risk-free rate

P of risk

ratio of portfolio risk premium to variance

Sharpe ratio

ratio of portfolio risk premium to s.d.

mean variance analysis

ranking portfolios by Sharpe ratios

inflation rate

rate that P rise, use CPI

capital allocation

choice b/w risky & risk-free A

complete portfolio

entire portfolio including risky & risk free A

passive strategy

policy that avoids security analysis

capital market line

the C.A.L. using the market index portfolio as the risky A

systematic risk

risk factors for WHOLE economy

nonsystematic risk

can be eliminated by diversifying

beta

sensitivity of security's returns to the market

alpha

stock's expected return BEYOND the market index.

firm-specific / residual risk

return variance independent of market factor

security characteristic line

it's a plot of a security's PREDICTED excess return FROM the excess return of the market

information ratio

ratio of ALPHA to the s.d. of the RESIDUAL

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