Chapter 15-18 Equity Flashcards
CFAI Equity Flashcards
Active share
A measure of how similar a portfolio is to its benchmark. A manager who precisely replicates the benchmark will have an Active Share of zero; a manager with no holdings in common with the benchmark will have an Active Share of one.
Breadth
The number of truly independent decisions made each year.
Buffering
Establishing ranges around breakpoints that define whether a stock belongs in one index or another.
Cash drag
Tracking error caused by temporarily uninvested cash.
Closet indexer
A fund that advertises itself as being actively managed but is substantially similar to an index fund in its exposures.
Completion overlay
A type of overlay that addresses an indexed portfolio that has diverged from its proper exposure.
Currency overlay
A type of overlay that helps hedge the returns of securities held in foreign currency back to the home country’s currency.
Exhaustive
An index construction strategy that selects every constituent of a universe.
Expected shortfall
The average loss conditional on exceeding the VaR cutoff; sometimes referred to as conditional VaR or expected tail loss.
Expected tail loss
Expected shortfall The average loss conditional on exceeding the VaR cutoff; sometimes referred to as conditional VaR or expected tail loss.
Information coefficient
Formally defined as the correlation between forecast return and actual return. In essence, it measures the effectiveness of investment insight.
Optional stock dividends
A type of dividend in which shareholders may elect to receive either cash or new shares.
Overlay
A derivative position (or positions) used to adjust a pre-existing portfolio closer to its objectives.
Packeting
Splitting stock positions into multiple parts.
Portfolio overlay
An array of derivative positions managed separately from the securities portfolio to achieve overall intended portfolio characteristics.