Term
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Definition
| commitment of current resources in the expectation of deriving greater resources in the future |
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Definition
| assets used to produce goods and services |
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Definition
| claims on real assets or the income generated by them. |
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Definition
| pay a specified cash flow over a specific period |
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Definition
| an ownership share in a corporation |
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Definition
| securities providing payoffs that depend on the values of other assets |
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Definition
| conflicts of interest between managers and stockholders |
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Term
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Definition
| allocation of an investment portfolio across broad asset classes |
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Definition
| choice of specific securities within each asset class |
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Definition
| analysis of the value of securities |
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Definition
| assets with higher expected returns have greater risk |
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Term
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Definition
| buying and holding a diversified portfolio without attempting to identify mis-priced securities |
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Term
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Definition
| attempting to identify mis-priced securities or to forecast broad market trends |
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Term
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Definition
| institutions that connect borrowers and lenders by accepting funds from lenders and loaning funds to borrowers |
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Term
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Definition
| firms managing funds for investors. An investment company may manage several mutual funds |
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Term
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Definition
| firms specializing in the sale of new securities to the public, typically by underwriting the issue |
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Term
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Definition
| market in which new issues of securities are offered to the public |
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Term
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Definition
| markets in which traders specializing in particular assets buy and sell for their own accounts |
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Term
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Definition
| already existing securities are bought and sold on the exchanges or in the OTC market |
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Term
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Definition
| a market where all traders meet at one place to buy or sell an asset |
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Term
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Definition
| tendency toward a worldwide investment environment, and the integration of national capital markets |
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Term
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Definition
| pools of loans sold in one package. Owners of pass-throughs receive all of the principal and interest payments made by the borrowers |
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Term
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Definition
| pooling loans into standardized securities backed by those loans, which can then be traded like any other security |
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Term
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Definition
| creation of new securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes |
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Term
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Definition
| process of creating and designing securities with custom-tailored characteristics |
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Term
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Definition
| include short-term highly liquid, and relatively low-risk debt instruments |
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Term
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Definition
| include longer-term relatively riskier securities |
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Term
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Definition
| short term government securities issued at a discount from face value and returning the face amount at maturity |
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Term
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Definition
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Term
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Definition
| short-term unsecured debt issued by large corporations |
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Term
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Definition
| an order to a bank by a customer to pay a sum of money at a future date |
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Term
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Definition
| dollar-denominated deposits at foreign banks or foreign branches of American banks |
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Term
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Definition
| short-term sales of government securities with an agreement to repurchase the securities at a higher price |
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Term
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Definition
| funds in the accounts of commercial banks at the federal reserve bank |
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Term
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Definition
| lending rate among banks in the London market |
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Term
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Definition
| debt obligations of the federal government with original maturities of 1 year or more |
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Term
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Definition
| tax-exempt bonds issued by state and local governments |
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Term
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Definition
| long-term debt issued by private corporations typically paying semiannual coupons and returning the face value of the bond at maturity |
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Term
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Definition
| ownership shares in a publicly held corporation. Shareholders have voting rights and may receive dividends |
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Term
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Definition
| nonvoting shares in a corporation, usually paying a fixed stream of dividends |
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Term
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Definition
| an average computed by adding prices of the stocks and dividing by a divisor |
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Term
| Market value-weighted index |
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Definition
| computed by calculating a weighted average of the returns of each security in the index, with weights proportional to outstanding market value |
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Term
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Definition
| an index computed from a simple average of returns |
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Term
| Derivative asset or contingent claim |
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Definition
| a security with a payoff that depends on the prices of other securities |
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Term
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Definition
| the right to buy an asset at a specified price on or before a specified expiration date |
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Term
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Definition
| the right to sell an asset at a specified exercise price on or before a specified expiration date |
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Term
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Definition
| obliges traders to purchase or sell an asset at an agreed upon price at a specified future date |
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Term
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Definition
| first sale of stock by a formerly private company |
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Term
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Definition
| they purchase securities from the issuing company and resell them |
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Term
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Definition
| a description of the firm and the security it is issuing |
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Term
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Definition
| primary offerings in which shares are sold directly to a small group of institutional or wealthy investors |
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Term
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Definition
| secondary market where already issued securities are bought and sold by members |
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Term
| Over the counter market (OTC) |
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Definition
| an informal network of brokers and dealers who negotiate sales of securities |
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Term
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Definition
| computer linked price quotation system for the OTC market |
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Term
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Definition
| price at which a dealer is willing to purchase a security |
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Term
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Definition
| price at which a dealer will sell a security |
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Term
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Definition
| trading of exchange listed securities on the OTC market |
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Term
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Definition
| direct trading in exchange listed securities between one investor and another without the benefit of a broker |
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Term
| Electronic communication networks (ECNs) |
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Definition
| computer networks that allow direct trading without the need for market makers |
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Term
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Definition
| a trader who makes a market in the shares of one or more firms and who maintains a fair and orderly market by dealing personally in the market |
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Term
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Definition
| large transactions in which at least 10,000 shares of stock are bought or sold |
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Term
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Definition
| coordinated sale or purchase of a portfolio of stocks |
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Term
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Definition
| the difference between a dealer’s bid and asked price |
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Term
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Definition
| describes securities purchased with money borrowed in part from a broker. The margin is the net worth of the investor’s account |
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Term
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Definition
| sale of shares not owned by the investor but borrowed through a broker and later purchased to replace the loan |
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Term
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Definition
| nonpublic knowledge about a corporation possessed by corporate officers, major owners, or other individuals with privileged access to information about the firm |
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Term
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Definition
| financial intermediaries that invest the funds of individual investors in securities or other assets |
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Term
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Definition
| assets minus liabilities expressed on a per share basis |
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Term
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Definition
| money pooled from many investors that is invested in a portfolio fixed for the life of the fund |
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Term
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Definition
| a fund that issues or redeems it shares at net asset value |
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Term
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Definition
| a fund whose shares are traded at prices that can differ from net asset value. Shares may not be redeemed at NAV |
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Term
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Definition
| sales commission charged on a mutual fund |
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Term
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Definition
| a private investment pool, open to wealthy or institutional investors, that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds |
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Term
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Definition
| annual fees charged by a mutual fund to pay for marketing and distribution costs |
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Term
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Definition
| the value of research services brokerage houses provide free of charge in exchange for the investment manager’s business |
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Term
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Definition
| ratio of the trading activity of a portfolio to the assets of the portfolio |
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Term
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Definition
| offshoots of mutual funds that allow investors to trade index portfolios |
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Term
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Definition
| rate of return over a given investment period |
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Term
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Definition
| the sum of returns in each period divided by the number of periods |
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Term
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Definition
| the single per-period return that gives the same cumulative performance as the sequence of actual returns |
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Term
| Dollar-weighted average return |
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Definition
| the internal rate of return on an investment |
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Term
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Definition
| process of devising a list of possible economic scenarios and specifying the likelihood of each one, as well as the HPR that will be realized in each case |
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Term
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Definition
| list of possible outcomes with associated probabilities |
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Term
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Definition
| mean value of the distribution of holding period returns |
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Term
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Definition
| expected value of the squared deviation from the mean |
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Term
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Definition
| the square root of the variance |
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Term
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Definition
| rate of return that can be earned with certainty |
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Term
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Definition
| expected rate of return in excess of that on risk-free securities |
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Term
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Definition
| rate of return in excess of the T-bill rate |
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Term
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Definition
| reluctance to accept risk |
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Term
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Definition
| the rate at which prices are rising, measured as the rate of increase of the CPI |
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Term
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Definition
| interest rate in terms of nominal dollars (not adjusted for purchasing power) |
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Term
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Definition
| excess of the interest rate over the inflation rate. The growth rate of purchasing power derived from an investment |
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Term
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Definition
| portfolio choice among broad investment class |
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Term
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Definition
| entire portfolio including risky and risk-free assets |
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Term
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Definition
| plot of risk-return combinations available by varying portfolio allocation between a risk-free asset and a risky portfolio |
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Term
| Reward to variability ratio |
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Definition
| ratio of risk premium to standard deviation |
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Term
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Definition
| investment policy that avoids security analysis |
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Term
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Definition
| capital allocation line using the market index portfolio as the risky asset |
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