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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


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


ratio, trading activity of portfolio: A of portfolio


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


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


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


sensitivity of security's returns to the market


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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