M, N, O Flashcards
Macaulay duration
The weighted-average term to maturity of
the cash flows from a bond, where the
weights are the present value of the cash
flow divided by the price. Macaulay
duration can be used to calculate modified
duration. See also Dollar duration,
Duration and Modified duration.
Macroeconomic approach
A top-down approach to equity investing
that begins with macro- and
microeconomic analysis of trends and market forecasts in the global, North
American, and Canadian economies. The
investor then selects industries or sectors
with the potential to outperform other
sectors, given the expected economic
outlook. Within each sector, the investor
chooses individual stocks, usually large-cap
stocks, to maximize liquidity. See also
Top-down approach.
Managed futures hedge fund
A hedge fund that invests in financial and
commodity futures markets and currency
markets around the world. See also Hedge
fund.
Managed product
A security created solely for the purpose of
investing in a portfolio of other securities
according to a specific investment mandate.
See also Closed-end fund, Exchange-traded
fund, Hedge fund, and Mutual fund.
Management fee
The fee charged by the manager of a
managed product. The fee is usually stated
as a percentage of the fund’s net assets. See
also Managed product.
Management’s Discussion and
Analysis (MD&A)
An important section of a company’s
annual report that provides insight into the
company that is not provided in financial
statements or the notes to the financial
statements.
Marginal tax rate
The amount of tax paid on an additional
dollar of ordinary income.
Market impact
The potential impact on the price of an
investment caused by buying or selling it.
Market strategist
See Investment strategist.
Market timer
See Sector rotator.
Marketed deal
A method of issuing equity or debt
securities whereby one or a group of
investment dealers attempt to pre-sell the
issue to clients before bringing them to
market. See also Bought deal.
Mature stage
The third stage of the industry life cycle.
This stage is characterized by steady and
reliable (though unspectacular) growth rates.
Maturity date
The date on which the issuer of a debt
security must repay the principal to
investors. See also Principal.
Mean variance analysis
The process of selecting the efficient
portfolio using either a quadratic formula
or a feel for the client’s objectives and risk
tolerance.
Medium-term note (MTN)
program
A method of issuing debt securities whereby
issuers file shelf prospectuses, which allow
them to issue a wide variety of securities, up
to a maximum amount, over an extended
period of time. The benefit of an MTN
program for the issuer is that the securities
can be issued on very short notice, because
there is no need to prepare a new
prospectus each time an issue is brought to
market. See also Shelf prospectus.
Mental accounting
A phenomenon whereby people do not
treat their assets as a single portfolio, but
keep track of them separately. Mental
accounting is a key tenet of behavioural
finance. See also Behavioural finance.
Merger arbitrage hedge fund
A hedge fund that invests simultaneously in
long and short positions in the common
stock of companies involved in a proposed
merger or acquisition. See also Hedge
fund.
Mezzanine capital
Private equity financing by use of
high-yield, unsecured preferred equity or
subordinated loans.
Modern portfolio theory
A theory that states that investors can
reduce the total risk of their portfolios by
owning smaller amounts of a group of less
than perfectly positively correlated assets
rather than larger amounts of an individual
asset.
Modified duration
The approximate percentage change in a
bond’s price for a 100-basis point change in
its yield. See also Duration and Macaulay
duration.
Money market security
A debt security initially issued with a term
to maturity of one year or less. See also
Term to maturity.
Money-weighted return
See Dollar-weighted return.
Morningstar tax-cost ratio
Determines the percentage of assets lost to
tax after distributions.
Mortgage-backed security (MBS)
A type of asset-backed security that is
backed by a pool of mortgages. See also
Asset-backed security
Moving average
An average of prices over a certain period
of time. See also Exponential moving
average, Simple moving average, and
Weighted moving average.
Moving average convergence- divergence (MACD)
An oscillator that measures the difference between a short-term and longer-term exponential moving average. In practice, the MACD oscillator is usually accompanied by an exponential moving average of the oscillator. See also Exponential moving average and Oscillator.
Moving average envelopes
Price bands that are plotted at a fixed
percentage above and below a moving
average of prices. See also Bollinger bands
and Price bands.
Multiple voting common shares
Common shares that have more than a single vote per share. See also Common shares, Non-voting common shares, Restricted voting common shares, and Subordinated voting common shares.
Multi-strategy, multi-manager
hedge fund
A hedge fund that invests in several other
hedge funds that employ different
strategies. See also Hedge fund.
Mutual fund
An open-ended managed product,
structured either as a corporation or as a
trust, that raises capital by issuing shares
(in the case of a mutual fund corporation)
or units (in the case of a mutual fund trust).
The capital is used to purchase securities
according to the fund’s investment
mandate. See also Managed product.
Net profit margin
A company’s net income divided by total
sales or revenue.
Net realized capital gains
Realized capital gains minus realized capital
losses. See also Realized capital gain and
Unrealized capital gain
Non-competitive tender basis
A type of bid in an auction of debt
securities whereby the bid is accepted in full
and bonds are awarded at the auction
average. See also Competitive tender basis
Non-market risk
See Unsystematic risk
Non-registered account
Accounts for which investment returns,
except unrealized net capital gains, are taxed
as they are earned. See also Registered
account.
Non-style-based approach
A group of investment strategies that do not
focus on a particular group of stocks but
involve a search for stocks with the best
chance of meeting particular objectives. See
also Pure fundamental approach, Pure
quantitative approach, and Pure technical
approach
Non-voting common shares
Common shares with no voting privileges. Most non-voting common shares, however, give shareholders limited voting rights or full voting rights under certain circumstances. See also Common shares, Multiple voting common shares, Restricted voting common shares, and Subordinated voting common shares
Normal distribution
A probability distribution that is
symmetrical around its expected return.
See also Expected return and Probability
distribution.
Normal portfolio
A specialized benchmark that includes all
the securities that a manager normally
selects from.
Normal yield curve
An upward- or positively-sloped yield curve
characterized by short-term interest rates
that are lower than longer-term interest
rates. See also Flat yield curve, Inverted
yield curve, and Yield curve.
Notes to financial statements
A comprehensive set of information that explains a company’s accounting policies and that provides more detailed information on individual items in the company’s financial statements.
Off-the-run issue
All non-benchmark Government of Canada
securities. See also On-the-run issue.
Offering memorandum
A legal document stating the objectives,
risks, and terms of investment involved
with a private placement such as a hedge
fund. See also Hedge fund.
On-the-run issue
A benchmark Government of Canada debt
security. On-the-run issues, which are
usually the most liquid security in their
maturity ranges, eventually become
off-the-run issues. See also Off-the-run
issue.
Open-ended questions
Questions that invite clients to talk about
themselves require more than a yes or no
answer and allow advisors to get to know
them better
Open mortgage-backed security
A mortgage-backed security backed by a
pool of mortgages with clauses that permit
the mortgagors (borrowers) to make early
principal prepayments, in addition to the
regularly scheduled principal and interest
payments. See Closed mortgage-backed
security and Mortgage-backed security
Operating performance ratio
A ratio that helps to determine a firm’s
long-run growth and survival prospects
Operational risk
The risk that a hedge fund may lack the
organizational depth, managerial talent and
strategic planning capabilities necessary to
ensure growth or even survival
Optimization approach
A bond indexing approach that builds on
the stratified sampling approach by using
mathematical programming to optimize the
portfolio, based on the stated return
objectives and constraints. See Stratified
sampling approach.
Optimizer
A computer-based application used to
determine a client’s strategic asset
allocation. See Strategic asset allocation.
Oscillator
An indicator that fluctuates between two
values. There are two classes of oscillators:
one class fluctuates between two fixed
values and the other is not bound by fixed
values. See also Moving average
convergence-divergence (MACD),
Relative strength index (RSI), and
Stochastic.
Outside day
For a key reversal, if prices close lower than
the previous day’s low (in the case of an
uptrend) or higher than the previous day’s
high (in the case of a downtrend). See also
Key reversal
Overlay management
A service that combines several managed
investment products into a single account
controlled by a single authority. Under
overlay management, customization and
efficient rebalancing are more efficient than
under combined separate accounts.
