Term
Calculating a Margin Call |
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Definition
P0 * [(1-Initial Margin) / (1-Maintenance Margin)]
Gives price at which an investor who goes long on a stock recieves a margin call |
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Term
Value of a Price Return Index |
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Definition
VPRI = ΣniPi / D
VPRI = Value of the price return index
ni = Number of units of constituent security i held in the index portfolio
Pi = Unit price of constituent security i
D = Value of the divisor |
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Term
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Definition
PRI = [VPRI1-VPRI0] / VPRI0
PRI = Price return of the index portfolio (as a decimal)
VPRI1= Value of the price return index at the end of the period
VPRI0 = Value of the price return index at the beginning of the period
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Term
Price Return of Each Constituent Security of an Index |
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Definition
PRi = [Pi1-Pi0] / Pi0
where:
PRi = Price return of constituent security i (as a decimal number)
Pi1 = Price of the constituent security i at the end of the period
Pi0 = Price of the constituent security i at the beginning of the period
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Term
Price Return of the Index is calculated as: |
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Definition
Weighted average price return of the constituent securities:
PRI = w1PR1 + w2PR2 + ....+ wNPRN
where:
PRI = Price return of the index portfolio (as a decimal number)
PRi = Price return of constituent security i (as a decimal number)
wi = Weight of security i in the index portfolio
N = Number of securities in the index |
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Term
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Definition
TRI = [VPRI1-VPRI0+IncI] / VPRI0
where:
TRI = Total return of the index portfolio (as a decimal number)
VPRI1 = Value of the total return index at the end of the period
VPRI0 = Value of the total return index at the beginning of the period
IncI = Total income from all securities in the index held over the period
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Term
Total Return of Each Constituent Security of an Index |
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Definition
TRi = [P1i-P0i+Inci] / P0i
where:
TRi = Total return of constituent security i (as a decimal number)
P1i = Price of constituent security i at the end of the period
P0i = Price of constituent security i at the beginning of the period
Inci = Total income from security i over the period |
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Term
Total Return of the Index is Calculated as: (Total Return formula) |
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Definition
TRI = w1TR1 + w2TR2 +....+ wNTRN
where:
TRI = Total return of the index portfolio (as a decimal number)
TRi = Total return of constituent security i (as a decimal number)
wi = Weight of security i in the index portfolio
N = Number of securities in the index |
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Term
Calculation of Index Returns Over Multiple Time Periods |
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Definition
VPRIT= VPRI0(1+PRI1)(1+PRI2) ... (1+PRIT)
where:
VPRI0 = Value of the price return index at inception
VPRIT = Value of the price return index at time t
PRIT = Price return (as a decimal number) on the index over the period
Can be valued the same way using values of a Total Return Index |
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Term
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Definition
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Term
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Definition
wiE = 1 / N
where:
wi = Fraction of the portfolio that is allocated to security i or weight of security i
N = Number of securities in the index |
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Term
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Definition
wiM = QiPi / ΣQjPj
where:
wi = Fraction of the portfolio that is allocated to security i or weight of security i
Qi = Number of shares outstanding of security i
Pi = Share price of security i
N = Number of securities in the index |
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Term
Float-Adjusted Market-Cap Weight of Each Constituent Security: |
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Definition
wiM = fiQiPi / ΣfjQjPj
where:
fi = Fraction of shares outstanding in the market float
wi = Fraction of the portfolio that is allocated to security i or weight of security i
Qi = Number of shares outstanding of security i
Pi = Share price of security i
N = Number of securities in the index |
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Term
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Definition
wiF = Fi / ΣFj
where:
Fi = A given fundamental size measure of company i |
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Term
Return Characteristics of Equity Securities |
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Definition
Total Return, Rt = (Pt–Pt-1+Dt) / Pt-1
where:
Pt-1 = Purchase price at time t – 1
Pt = Selling price at time t
Dt = Dividends paid by the company during the period |
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Term
Accounting Return on Equity |
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Definition
ROEt = NIt / Average BVEt = NIt / [(BVEt+BVEt-1) / 2]
Net Income / Avg Book value of equity |
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Term
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Definition
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Term
Dividend Discount Model One Year Holding Period |
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Definition
[Dividend to be recieved + year-end price] / (1 +ke)1 |
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Term
Multiple-Year Holding Period DDM |
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Definition
v = [D1 / (1+ke)1] + [D2 / (1+ke)2] + ... + [Pn / (1+ke)n] |
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Term
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Definition
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Term
Long-term constant growth rate |
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Definition
gc = RR * ROE
**What's RR?? Retention Rate? |
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Term
Multi-Stage Dividend Discount Model |
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Definition
Value = [D1 / (1+ke)1] + [D2 / (1+ke)2] +...+ [Dn / (1+ke)n] + [Pn / (1+ke)n]
Where:
Pn = D(n+1) / [ke-gc]
Dn = Last dividend of the supernormal growth period
Dn+1 = First dividend of the constant growth period |
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Term
Free Cash Flow to Equity Model |
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Definition
V0 = ΣFCFEt / (1+ke)t
FCFE = CFO - FC Inv + Net Borrowing
Intrinsic value of the company's stock by discounting projections of FCFE at the required rate of return on equity |
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Term
Value of a Preferred Stock |
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Definition
Non-callable, non-convertible, no maturity date, and pays fixed dividends:
V0 = D0 / r
Non-callable, non-convertible, preferred stock with maturity at time n:
V0 = ΣDt / (1+r)t + [F / (1+r)n]
where:
V0 = value of preferred stock today (t = 0)
Dt = expected dividend in year t, assumed to be paid at the end of the year
r = required rate of return on the stock
F = par value of preferred stock |
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Term
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Definition
Market Price of Share / Cash Flow per Share |
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Term
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Definition
Market Price per Share / Net Sales per Share
or:
Market value of equity / Total Net Sales |
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Term
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Definition
Current Market Price of Share / Book Value per Share
Market Value of Common Shareholders' Equity / Book Value of Common Shareholders' Equity
where:
Book value of common shareholders’ equity = (Total assets - Total liabilities) - Preferred stock |
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Term
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Definition
Price to CF
Price to Sales
Price to Book |
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Term
Enterprise Value Multiples |
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Definition
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Term
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Definition
EV = Enterprise value:
MV of common stock
+ MV of outstanding preferred stock
+ MV of Debt
- Cash and cash equivalents |
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