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30 terms

Investments Ch 4-6

STUDY
PLAY
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