M, N, O

Question 1

Macaulay duration

Answer 1

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.

Question 2

Macroeconomic approach

Answer 2

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.

Question 3

Managed futures hedge fund

Answer 3

A hedge fund that invests in financial and
commodity futures markets and currency
markets around the world. See also Hedge
fund.

Question 4

Managed product

Answer 4

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.

Question 5

Management fee

Answer 5

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.

Question 6

Management’s Discussion and

Analysis (MD&A)

Answer 6

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.

Question 7

Marginal tax rate

Answer 7

The amount of tax paid on an additional

dollar of ordinary income.

Question 8

Market impact

Answer 8

The potential impact on the price of an

investment caused by buying or selling it.

Question 9

Market strategist

Answer 9

See Investment strategist.

Question 10

Market timer

Answer 10

See Sector rotator.

Question 11

Marketed deal

Answer 11

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.

Question 12

Mature stage

Answer 12

The third stage of the industry life cycle.
This stage is characterized by steady and
reliable (though unspectacular) growth rates.

Question 13

Maturity date

Answer 13

The date on which the issuer of a debt
security must repay the principal to
investors. See also Principal.

Question 14

Mean variance analysis

Answer 14

The process of selecting the efficient
portfolio using either a quadratic formula
or a feel for the client’s objectives and risk
tolerance.

Question 15

Medium-term note (MTN)

program

Answer 15

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.

Question 16

Mental accounting

Answer 16

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.

Question 17

Merger arbitrage hedge fund

Answer 17

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.

Question 18

Mezzanine capital

Answer 18

Private equity financing by use of
high-yield, unsecured preferred equity or
subordinated loans.

Question 19

Modern portfolio theory

Answer 19

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.

Question 20

Modified duration

Answer 20

The approximate percentage change in a
bond’s price for a 100-basis point change in
its yield. See also Duration and Macaulay
duration.

Question 21

Money market security

Answer 21

A debt security initially issued with a term
to maturity of one year or less. See also
Term to maturity.

Question 22

Money-weighted return

Answer 22

See Dollar-weighted return.

Question 23

Morningstar tax-cost ratio

Answer 23

Determines the percentage of assets lost to

tax after distributions.

Question 24

Mortgage-backed security (MBS)

Answer 24

A type of asset-backed security that is
backed by a pool of mortgages. See also
Asset-backed security

Question 25

Moving average

Answer 25

An average of prices over a certain period
of time. See also Exponential moving
average, Simple moving average, and
Weighted moving average.

Question 26

Moving average convergence- divergence (MACD)

Answer 26

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.

Question 27

Moving average envelopes

Answer 27

Price bands that are plotted at a fixed
percentage above and below a moving
average of prices. See also Bollinger bands
and Price bands.

Question 28

Multiple voting common shares

Answer 28

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.

Question 29

Multi-strategy, multi-manager

hedge fund

Answer 29

A hedge fund that invests in several other
hedge funds that employ different
strategies. See also Hedge fund.

Question 30

Mutual fund

Answer 30

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.

Question 31

Net profit margin

Answer 31

A company’s net income divided by total

sales or revenue.

Question 32

Net realized capital gains

Answer 32

Realized capital gains minus realized capital
losses. See also Realized capital gain and
Unrealized capital gain

Question 33

Non-competitive tender basis

Answer 33

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

Question 34

Non-market risk

Answer 34

See Unsystematic risk

Question 35

Non-registered account

Answer 35

Accounts for which investment returns,
except unrealized net capital gains, are taxed
as they are earned. See also Registered
account.

Question 36

Non-style-based approach

Answer 36

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

Question 37

Non-voting common shares

Answer 37

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

Question 38

Normal distribution

Answer 38

A probability distribution that is
symmetrical around its expected return.
See also Expected return and Probability
distribution.

Question 39

Normal portfolio

Answer 39

A specialized benchmark that includes all
the securities that a manager normally
selects from.

Question 40

Normal yield curve

Answer 40

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.

Question 41

Notes to financial statements

Answer 41

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.

Question 42

Off-the-run issue

Answer 42

All non-benchmark Government of Canada

securities. See also On-the-run issue.

Question 43

Offering memorandum

Answer 43

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.

Question 44

On-the-run issue

Answer 44

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.

Question 45

Open-ended questions

Answer 45

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

Question 46

Open mortgage-backed security

Answer 46

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

Question 47

Operating performance ratio

Answer 47

A ratio that helps to determine a firm’s

long-run growth and survival prospects

Question 48

Operational risk

Answer 48

The risk that a hedge fund may lack the
organizational depth, managerial talent and
strategic planning capabilities necessary to
ensure growth or even survival

Question 49

Optimization approach

Answer 49

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.

Question 50

Optimizer

Answer 50

A computer-based application used to
determine a client’s strategic asset
allocation. See Strategic asset allocation.

Question 51

Oscillator

Answer 51

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.

Question 52

Outside day

Answer 52

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

Question 53

Overlay management

Answer 53

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.