30 terms

Investments Ch 4-6

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