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384“385
537“540 dynamic, 540, 554 foreign, 737
federal government policies,
Generally accepted accounting exchange rate risk, 587“588, Indexing, 156, 267, 695
388“390
principles 728“731 Social Security, 640
and global economy, 382“384
earnings management, 434“435 in futures markets, 577“579 Index model, 194
Graham technique, 477“478
economic vs. accounting interest rate futures, 589“590 and CAPM, 228“229
industry analysis, 396“405
income, 470 labor income, 645 estimating, 230“232
interest rates, 386“387
and international accounting by life insurance companies, 605 expected-return-beta relationship,
Fundamental analysts, 266, 413
practices, 477 long hedge, 578 229“230
Future earnings, 464
revenue recognition, 473 perfect, 536 predicting betas, 238“239
Futures contracts, 6, 51“53, 491,
and stock options, 473 Hendricksson, Roy D., 705“706 and security market line, 231“232
566“571
General Motors, 4, 7, 156, 222, High-yield bonds, 317“318 Index options, 496
basics of, 567“570
230“232, 268, 299, 351, Historical rates of return Index 500 Portfolio, 267
compared to options, 565,
362, 614 and inflation, 146“148 Index portfolios, 597
570, 571
General obligation bonds, 33 record of, 139“146 Index puts, 552
kinds of, 572
Geometric average, 133 Historical record Individual asset risk, 227
margin accounts, 567
Geometric mean, 143 bond prices, 312“316 Individual behavior
price determinants, 580“583
Geske, Robert, 556 on CAPM, 241 bidding, 653
types of existing contracts,
GIC; see Guaranteed investment capital market line, 156“158 cooperation and altruism, 652
571“572
contract exchange rate risk, 727“729 endowment effect, 653“654
volume of trading in, 566
Global Crossing collapse, 435, 473 price-share performance, 157 irrational decisions, 655
zero sum game, 570
Global economy, 382“384 two risky assets, 175“176 loss aversion, 653“654
Futures market, 565
international accounting Historical variance, 142 mental accounts, 654, 656
financial futures
conventions, 474“477 Hlavka, M., 283“284 status quo bias, 653“654
creating synthetic stock
stock index futures, 586 Holding-period return, 132, 229 winner™s curse, 653
positions, 585
Globalization, 15“16, 79 and expectations hypothesis, 324 Individual investors, objectives,
foreign exchange, 587“588
Goetzmann, William N., 116 expected excess, 193 601“602
index arbitrage, 587
Goldman, Sachs and Company, 13, expected return and, 136 Individual Retirement Accounts, 111,
interest rate futures, 589“590
18, 69, 70, 389, 745 historical record, 140“141 632, 634“635
program trading, 587
Goodwill, 475 interpretation of, 314 Industrial development bonds, 33
stock index futures, 584“585
Goodyear Tire and Rubber, 43 probability distribution, 136 Industrial long-term debt, 319
triple witching, 587
Gordon, Myron J, 418 and risk-free rate, 137 Industrial production, 384
functions, 567
Government National Mortgage scenario analysis, 135“137 Industrial production index, 392
mechanics of trading
Association, 16“17, 32“33, variability, 146 Industry analysis, 396“405
cash vs. actual delivery, 576
38“39, 589“590 versus yield to maturity, 313“314 capacity utilization rate, 385
clearinghouse, 571“573
Government of Canada bonds, 373 Holding time to maturity, 347 cyclical industries, 391
convergence property, 575
Govoly, Dan, 278 Home country bias, 726 defensive industries, 391
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-7
Index

Industry analysis”Cont. Interest”Cont. International investments”Cont. Investment policies”Cont.
defining an industry, 396“397 floating-rate bonds, 300 correlation coefficient, 739, monitoring and revision
financial ratios, 424 on mortgages, 37 740, 741 portfolios, 615“616
industry life cycle, 401“404 time deposits, 27“28 global market for equities, for mutual funds, 104“106
sector rotation, 400“401 Interest-burden ratio, 459 722“726 rational, 268
sensitivity to business cycles, Interest coverage ratio, 463 home country bias, 726 resource allocation, 268“269
398“400 Interest expense, 471“472 performance attribution, 746“748 social investing, 606
structure and performance, Interest rate forecasting, 361 portfolio construction, 746“748 and taxes, 268
404“405 Interest rate futures, 589“590 questions about, 747 top-down, 612“614
Industry classification systems, 397 Interest rate options, 50, 498 risk and return, 734“738 Investment portfolio; see Portfolio
Industry cyclicality, 399 Interest rate parity risk factors Investment process, 8“9
Industry earnings growth, 396, 397 relationship, 729 country-specific risk, stages of, 599
Industry life cycle, 401“402 Interest rate risk 731“734 Investment risk, 135; see also
consolidation stage, 403 banks and pension funds, 350 exchange rate risk, 726“731 Portfolio risk; Risk
Lynch™s groupings, 403“404 and bond coupon rate, 341 political risk, 731“732 Investments, 2, 3; see also
maturity stage, 403 duration, 342“349 riskless strategies, 729 International investments;
relative decline stage, 403“404 interest rate sensitivity, 340“342 special problems, 721 Savings plans
start-up stage, 402 and interest rate swaps, 366“368 International Monetary Fund, 742 asset allocation, 148“155
Industry sales growth, 409 and investment strategy, 339 International stock market indexes, bonds vs. stocks, 157
Industry stock price performance, 398 shed by immunization, 350“357 46“47, 48 historical record, 139“146
Industry structure and performance Interest rates, 385 Internet, 19“20 impact of expenses, 109“111
buyer bargaining power, 404“405 annual percentage rate, 32, Internet boom, 432 and interest rates, 385
competitor rivalry, 404 134“135, 307 Internet Index, 513 and macroeconomic forecasting,
substitute products, 404 and bond pricing, 303“306 Interval closed-end funds, 102“103 388, 389
supplier bargaining power, 405 callable bonds, 309“310 In-the-money options, 493, options vs. stocks, 500“504
threat of entry, 404 determining level of, 386“387 532“534 passive vs. active
Inefficient markets, 278“279, 279 effective annual rate, 134“135 Intrinsic value, 532 management, 10
Inflation, 385 effect of demand/supply shocks, versus market price, 415“416 performance of mutual funds,
and earnings, 434 387“388 of shares, 216 114“118
historical record, 139“146 equilibrium nominal rate, Inventory turnover ratio, 462 in real assets, 6
and real interest expense, 147“148 Inventory valuation, 470“471 in real estate, 644
471“472 forward rate, 325 Inventory valuation adjustment, 471 right mix, 155
and real rates of return, 146“148 and inflation, 146“148 Inverted yield curve, 322 risk in, 6“7, 9“10
and savings plans, 628“629 insurance policies, 605 Investment assets, 8 risks and risk premium, 135“139
Inflation-adjusted exchange rate, and monetary policy, 389“390 Investment bankers, 13“14 risky, 637“638
383“384 on mortgages, 37 best-efforts agreement, 60 uncertainty surrounding, 136
Inflation assumption, 637 nominal, 147 initial public offerings, 61“65 underperforming IPOs, 63, 64
Inflation-indexed bonds, 302 real, 147 issuance of securities, 60“61 websites for, 2
Inflation rate, 146“147 realized compound yield, road shows, 62 Investment strategies
effect of demand/supply shocks, 310“312 Investment committee, 612“614 active, 339
387“388 risk structure, 322 Investment companies, 11, 13, 99, contrarian, 272
Inflation-unemployment term structure of, 322“323 100, 101 fixed-income, 364“366
trade-off, 385 volatility, 293, 589 commingled funds, 103 and industry life cycle, 403
Initial public offerings, 60, 61“65 and yield to maturity, 307“309 functions for investors, 100 market timing, 702“706
allocated across investors, 63 Interest rate sensitivity, 339, 340“342 hedge funds, 103“104 passive, 339, 350“358
average first-day returns, 63, 64 Interest rate swaps, 366 managed, 101“103 passive core, 613
Dutch auction, 65 Intergenerational transfers, 646 real estate investment trusts, 103 with Treynor-Black model,
poor long-term performance, Intermarket spread swap, 362 types of, 100“104 709“712
63“64 Intermarket Trading System, 70 unit investment trusts, 100 using tax shelters, 632“639
road shows, 62 Intermediate trend, 661 Investment Companies, 118 Investors
underpriced, 63 Internal rate of return, 134, 228, 307 Investment Company Act of 1940, age differences, 268
Web-based, 63“64 on Social Security benefits, 642 100“101 anticipated return, 9
Inside information, 91, 278 Internal Revenue Service, Investment Company Institute, 118 asset allocation choice, 151“152
Inside quotes, 68, 72 315“316 Investment decisions, 3“4 bookbuilding, 62
Insider trading, 91“92, 265, 278 International accounting conventions Investment environment, 1 buying on margin, 82“86
Instinet, 69 depreciation, 475 derivative securities, 6 and Capital asset pricing
Institute of Chartered Financial intangibles, 475“477 recent trends model, 221
Analysts, 600 reserving practices, 474“475 computer networks, 19“20 constraints on
Code of Ethics, 89 International Accounting financial engineering, 18“19 investment horizon, 607
Institutional investors Standards, 477 globalization, 15“16 liquidity, 606“607
block transactions, 75 International bonds, 33, 301 securitization, 16“18 regulations, 607
objectives, 602“606 International Country Risk Guide, 73, Investment grade bonds, 316“317 short-sale restrictions, 190
top-down policy, 612“614 721, 732, 734 Investment horizon, 607 tax considerations, 607
Insurance companies, 11, 13, International diversification Investment opportunities, unique needs, 607“609
350“351 and bear market, 743“744 420“423, 430 and convexity, 361
Insurance principle, 170 benefits, 738“739 Investment opportunity set, and financial intermediaries,
Intangible assets, 475 misleading representation of 178, 179 11“13
international accounting benefits, 739“742 Investment policies, 611“615 forecasting errors, 280
conventions, 475“477 realistic benefits from, 742“743 active vs. passive, 267“268, foreign investment opportunities,
Intel Corporation, 6, 43, 72, 414, 467 International investments 614“615 15“16
Interest benefits of diversification, asset allocation, 611“612 framing, 281
equivalent taxable yield, 34“35 738“744 life-cycle approach, 621 and investment brokers, 62“63
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-8 Index

Investors”Cont. Kaul, Gautam, 270 Market anomalies”Cont.
Loan arrangements, 517
investment company Keim, Donald B., 273, 275 Loan portfolio, 605“606 insider trading, 278
functions, 100 Kellogg, 434“435 Loews, 467 interpreting evidence on
irrational decisions, 655 Kendall, Maurice, 261, 262, 270 London Financial Futures behavioral interpretation,
life-cycle view of, 601 Keown, Arthur, 263 Exchange, 588 278“281
limit orders, 72“73 KMPG, 473 London Interbank Offer Rate, 29, data mining, 279
losses on debt securities, 293 Kondratieff wave theory, 662 366“368 risk premiums vs.
and market anomalies, 656“657 Kotlikoff, Laurence J., 646 London International Financial inefficiencies, 278“279
market orders, 72 Futures and Options Exchange, irrationalities, 280“281
L
and market portfolio, 221 78, 584 January effect, 275
matrix of constraints, 610“611 London Stock Exchange, 46, 67, 78 liquidity effect, 275“276
Labor unions, 405
mental accounting, 281 Longevity, 642 neglected-firm effect, 275
Lakonishok, Josef, 272, 279, 671
objectives, 600“606 Long hedge, 578 post-earnings price drift, 276“278
Large company stocks, 143
banks, 605“606 Longin, F., 743 small-firm effect, 274“275
Last-in, first-out system, 470, 471
endowment funds, 606 Long position, 52“53, 567“570, 580 Market capitalization
Law of one price, violation of, 242
individual investors, 601“602 Long-term assets, 453 in developed countries, 722“723
Leading economic indicators,
life insurance companies, Long-term Capital Management, 30, in emerging markets, 723“725
393“396
604“605 104, 293, 382“383 and GDP, 725“726
economic calendar, 395, 396
monitoring and revising, Long-term debt, 453 stock exchanges, 721
key economic statistics, 384“385
615“616 Long-term Equity AnticiPation Market capitalization rate, 416,
LEAPS, 495, 552
professional investors, Securities, 495, 552 426“427
Lease, R., 656, 657
602“604 Long-term government bonds, 143 Market capitalization weights,
Le Baron, Blake, 671
unique needs compared to Lookback options, 519 745“746
Lehman Brothers, 47, 49, 139, 613
constraints, 608“609 Loss aversion, 653“654 Market conversion, 300
Lehman Brothers Aggregate Bond
overconfidence, 280“281 Loughran, T., 64 Market demand, 220
Index, 267
in over-the-counter market, 76“77 Lowenstein, Roger, 351 Market efficiency, 699
Lehman Brothers Index, 364, 698
passive strategies, 155“158 Low-load funds, 108 Market equilibrium, 216
Lehmann, Bruce, 272“273
portfolio choice, 192 Luccheth, Aaron, 172 Market index, 232“233
Leinweber, David, 586
primary kinds of risk, 608 Lucent Technologies, 433, 467 Market inefficiency, 597
Lev, Baruch, 474“475
prudent investor rule, 607 Lucky-event issue, 270 Market makers, 68
Leverage, 50
rational behavior assumption, 651 Ludwig, Robert, 747 Market making, 74
futures contracts, 577
regret avoidance, 281 Lynch, Peter, 270, 284, 286, 403, 431 Market orders, 72
Leverage ratio, 318, 460
risk aversion, 138, 600 Market portfolio, 221“222, 229
Levered equity, 517“519
M
risk-return trade-off, 9“10 mutual fund theorem, 223
Levered equity position, 547“548
risk tolerance, 600, 601 reasons for holding, 222“223
Lewellen, W., 656, 657 Macaualy, Frederick, 342
short sales, 86“88 risk premium, 223“224
Li, Kai, 752 Macaulay™s duration, 342“344
social investing, 606 Market price ratios, 463“465
Liabilities MacBeth, James, 241
trade-offs, 131 Market price vs. intrinsic value,
on balance sheet, 453“454 MacKinley, Craig, 270
value investing, 477“478 415“416
off-balance sheet, 473 Macroeconomic factors, 170, 193
Invoice prices, 298 Market risk, 170, 194, 199,
Liebowitz, Martin L., 341, 362, Macroeconomy
IPO; see Initial public offerings 230“232, 608
364, 366 business cycles, 391“396
Irrationalities, 280“281 Market structure indicators, 667
Liesman, Steve, 475 demand and supply shocks,
“Is Beta Dead?”, 241 breadth of the market, 671“672
Life annuity, 645 387“388
moving averages, 670“671
Life cycles dividend discount model, domestic, 384“385
J relative strength, 672“673
423“427 effect of interest rates, 386“387
Market timing, 691“693, 702
Jacquier, Eric, 743 Life-cycle view of investors, 601 federal government policies,
and beta, 691“693
Jaffe, Jeffrey A., 91, 278, 317 Life insurance companies 388“390
measuring performance, 705“706
Jaffee, Charles A., 608 constraints and objectives, global, 382“384
value of imperfect forecasting,
Jagannathan, Ravi, 158, 427n 610, 611 industry analysis, 396“405
704“705
January effect, 275 investment objectives, 604“605 key economic statistics, 384“385
valuing as an option, 703“704
Japan Index, 496 LIFO; see Last-in, first-out system leading economic indicators,
Market-to-book-value ratio,
Jarrow, R. A., 280n Limited liability, 40 393“396
463“464
Jasen, Georgette, 692 Limit order book, 70, 79 unreliable forecasting, 388, 389
Market-tracking index funds, 655
JC Penney, 397 Limit orders, 72“73, 75“76, 77 Magnitude issue, 269
Market value-weighted indexes,
Jegadeesh, Narasimhan, 271, Linear regression equation, 230“231 Maintenance margin, 83, 574
45“46
272“273, 672, 673 Lipper General Equity Fund Maksimivic, V., 280n
Market value-weighted portfolio, 139
Jensen, Michael C., 241, 685 Average, 115 Malkiel, Burton G., 117, 282, 283,

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