Chapter 15-18 Equity Flashcards

CFAI Equity Flashcards

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1
Q

Active share

A

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.

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2
Q

Breadth

A

The number of truly independent decisions made each year.

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3
Q

Buffering

A

Establishing ranges around breakpoints that define whether a stock belongs in one index or another.

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4
Q

Cash drag

A

Tracking error caused by temporarily uninvested cash.

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5
Q

Closet indexer

A

A fund that advertises itself as being actively managed but is substantially similar to an index fund in its exposures.

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6
Q

Completion overlay

A

A type of overlay that addresses an indexed portfolio that has diverged from its proper exposure.

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7
Q

Currency overlay

A

A type of overlay that helps hedge the returns of securities held in foreign currency back to the home country’s currency.

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8
Q

Exhaustive

A

An index construction strategy that selects every constituent of a universe.

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9
Q

Expected shortfall

A

The average loss conditional on exceeding the VaR cutoff; sometimes referred to as conditional VaR or expected tail loss.

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10
Q

Expected tail loss

A

Expected shortfall The average loss conditional on exceeding the VaR cutoff; sometimes referred to as conditional VaR or expected tail loss.

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11
Q

Information coefficient

A

Formally defined as the correlation between forecast return and actual return. In essence, it measures the effectiveness of investment insight.

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12
Q

Optional stock dividends

A

A type of dividend in which shareholders may elect to receive either cash or new shares.

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13
Q

Overlay

A

A derivative position (or positions) used to adjust a pre-existing portfolio closer to its objectives.

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14
Q

Packeting

A

Splitting stock positions into multiple parts.

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15
Q

Portfolio overlay

A

An array of derivative positions managed separately from the securities portfolio to achieve overall intended portfolio characteristics.

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16
Q

Program trading

A

A strategy of buying or selling many stocks simultaneously.

17
Q

Rebalancing overlay

A

A type of overlay that addresses a portfolio’s need to sell certain constituent securities and buy others.

18
Q

Selective

A

An index construction methodology that targets only those securities with certain characteristics.

19
Q

Transfer coefficient

A

The ability to translate portfolio insights into investment decisions without constraint.