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Marking to market, 573“575, 574
Jensen measure, 686 Liquidation date, 607 341, 346“347, 358, 692
Markowill Group, 684
Johnson & Johnson, 448 Liquidation value, 134, 414 Managed investment companies,
Markowitz, Harry, 10, 169, 189
Joint tests, 274 Liquidity, 241, 606“607 101“103
Markowitz algorithm, 235“237
Journal of Finance, 241 endowment funds, 621 Management
Marriage, 646
Junior debtholders, 320 of Treasury bills, 27 agency problem, 8
Marsh, Paul, 157, 158
Junk bonds, 6, 105, 317 uncertain, 645 separate from ownership, 7“8
Marshall, Larry, 84
default risk, 317“318 Liquidity effect, 275“276 Marcus, Alan, 743
MasterToy Inc., 483
yields since 1954, 322 Liquidity preference theory, Margin, 82“86
MATIF, 584
Justice Department, 77 323“326 futures contracts, 567
Maturities
Liquidity premium, 326 requirements on options, 495“496
on commercial paper, 28
K Liquidity ratios, 318, 462“463 Margin account, 153
municipal bonds, 33
Liquidity risk, 70, 608 Marginal propensity to consume, 654
put options, 552
Kahneman, Daniel, 280
Lloyd™s of London, 14 Margin calls, 83
Treasury securities, 31,
Kansas, Dave, 389
Lo, Andrew W., 270 Market anomalies, 273“278
296“297, 315
Kao, G. Wenchi, 49
Load, 103 book-to-market effect, 276
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-9
Index

Maturity date, 342 NASDAQ Canada, 79
Mortgage-backed securities, 32“33, Nordic Countries Alliance, 79
Maturity stage, 403 NASDAQ Composite Index
37“39, 301 Normal distribution, 145
May Day commissions, 68 fall in, 84
market in, 293 North American Free Trade
Mayers, David, 225 NASDAQ Europe, 79
Mortgage bond, 320 Agreement, 382, 397
Mazuy, Kay, 705 NASDAQ Japan, 79
Mortgage pools, 16“17, 37 North American Industry
McGee, Suzanne, 586 NASDAQ National Market
Mortgages, 37“39 Classification System, 397
McGrattan, Ellen R., 158, 427n System, 67
Mortgage tax deduction, 644 Northwestern-most portfolio, 178,
Mean return, 136, 142 NASDAQ 100 Index, 112, 434“435
Mortgage trusts, 103 189“190
Mean reversion, 657 NASDAQ SmallCap Market, 67
Morton, Robert C., 275 Notional principle, 366
Mean-variance criterion, 178“182 NASDAQ Stock Market, 67
Moving averages, 670“671
O
M2 measure, 686“688
Mean-variance efficiency, 701“702 National Association of Securities
Me-first rule, 320 Mueller, Gerhard G., 476 Dealers, 67, 69; see also
Obligation to purchase, 53
Mendelson, Haim, 241, 275“276 Multifactor generalization, 247“250 NASDAQ
O™Connell, Vanessa, 121
Mental accounts, 280, 654“655 Multifactor security market line, 249 Securities and Exchange
O™Connor, Robert, 501
Merck and Company, 9, 448, 467 Multinational corporations, 747 Commission settlement, 77
Odd-lot trading, 668“669
Merrill Lynch, 13, 47, 49, 69, 70, 84, Multiple periods, 132“134 National market system, 81
Odean, Terrance, 280
109, 293, 389, 589, 602“603 Multistage growth dividend discount National securities market, 69“70
Off-balance sheet assets and
Merton, Robert C., 539n, 540, 703 model, 423“428 NAV; see Net asset value
liabilities, 473
Metcalf, Gilbert, 692 Municipal bonds, 33“35 Negative beta, 196
Official Summary of Insider
Mexico, 302 Murphy, Eddie, 573 Negative correlation, 181“182
Trading, 278
Microsoft Corporation, 43, 67, Mutual fund cash positions, 669 Negative serial correlation, 270“271
Official Summary of Securities
112, 226, 422, 433, 467, Mutual fund managers, 284“285, 286 Negative systematic risk, 196
Transactions and Holdings, 91
492“493, 494, 498“503, Mutual funds, 13, 99, 103, 603, Neglected-firm effect, 275
Old economy, 433
511, 549, 550, 670 688“689 Neiman Marcus, 397, 460
Olsen, Chris, 277
Milken, Michael, 318 classes, 108“109 Net asset value, 100, 101“102, 106,
One Up on Wall Street (Lynch),
Miller, Merton H., 215 closed-end, 101“103 109“110, 112“113, 657“658
403, 431
Minor trends, 661 constraints on, 610 Net cash flows, 134
Online brokers, 69
Mispricing, identification of, 361 costs of investing in, 107“111 Net profit on call option, 492
Online trading, 1, 19“20, 63“64, 80
Mobil, 320, 321 disclosure documents, 120“121 New Quotation System, 78
Open-end funds, 101“103
Modern portfolio theory, 10 and economic downturn, 172 New vs. old economy, 432, 433
Open interest, 52
Modified duration, 345“346 and exchange-traded funds, New York Stock Exchange, 1, 15,
OpenIPO, 65
Modigliani, Franco, 215, 687, 688 112“114 40“41, 171, 274, 306, 320, 475,
Open market operation, 390
Modigliani, Leah, 687, 688 fees and returns, 109“111 477, 585
Operating earnings, 434
Monetary policy, 389“390 fee structure, 107“109 alliances, 79
Operating expenses, 108
Effect on interest rates, 387 indexed portfolios, 267“268 annual returns, 146
Operating leverage, 399“400
Monetary Trends, 165 information sources, 118“123 block transactions, 75
Optimal risky portfolio, 185, 226
Money market, 6, 26, 26“30 international focus, 734 bond exchange, 70
asset allocation, 151“152
bankers™ acceptances, 28 investment performance, 114“118 bond trading, 298“299
choosing, 191“192
brokers™ calls, 29 investment policies, 104“106 and electronic communication
with risk-free asset, 184“187
certificates of deposit, 27“28 kinds of, 104“106 network, 69
Option Clearing Corporation,
commercial paper, 28 low-load, 108 going public, 69
495“496
components, 25, 27 management companies, 104 indexes, 46
Option contract, 492“498
Eurodollars, 28“29 no-load, 108 initial listing requirements, 66
Option elasticity, 551
federal funds, 29 open-end, 101“103 and Intermarket Trading
Optionlike securities
London Interbank Offer Rate performance of, 281“286 System, 70
callable bonds, 512“514
market, 29 prospectus, 118 market making, 72
collateralized loans, 517
rates on securities, 26 risk-adjusted rating, 708“709 operation of, 64“67
convertible securities, 514“516
repurchase agreements, 29 selling of, 107 price priority, 77
levered equity and risky debt,
Treasury bills, 27 taxation of income, 111“112 Rule 80A, 90
517“519
yields, 30 time-weighted average, 133 seat prices, 66
warrants, 516“517
Money market funds, 104 Mutual Fund Sourcebook, 108, 118 self-regulation, 89“91
Options, 6, 491
Money market mutual fund, Mutual fund theorem, 223 and specialist firms, 74“75
and agency problem, 8
150“151 SuperDot System, 59, 76, 587
American, 495, 550, 556
N
Money spread, 508 and third market, 68
at-the-money, 493
Money supply, 389“390 and trading costs, 81“82
NAICS codes, 397 call options, 48“51, 492
economic indicator, 395 New York Stock Exchange index, 496
Naive diversification strategy, 170 delta, 550
Moody™s Industrial Manual, New York Times, 241
Naked option writing, 500, 506 European, 495, 540,
320, 321 Nicoliasen, Donald, 50
Naked put options, 501 546“547, 549
Moody™s Investor Services, Nikkei Index, 46, 496, 735
NASDAQ, 1, 67, 585 exotic types, 519“520
316“317 No-arbitrage restriction, 215
annual returns, 146 foreign currency, 497
Moral hazard, 646 No-free-lunch rule, 9“10
competition for New York Stock futures options, 496
Morgan Stanley, 69, 745 Nofsinger, John, 655
Exchange, 66“67 hedge ratio, 550“552
Morgan Stanley Capital No-load funds, 108
indexes, 46 index options, 496
International, 747 Nominal interest rate, 147, 387, 471
investigation of, 77 interest rate, 498
stock indexes, 46“47, 48 equilibrium, 147“148
margin calls, 83 in-the-money, 493
Morgan Stanley Capital Investment Nominal rate of return, 302“303
operation of, 67“68 LEAPS, 495, 552
index, 737 Nominal risk-free interest rate, 303
self-regulation, 89“91 margin requirements, 495“496
Morgan Stanley Dean Witter, 688 Noncompetitive bid, 27
Small Order Execution out-of-the-money, 493
Morningstar, Inc., 108, 118, Nondiversifiable risk, 171, 247
System, 76“77 purchase price, 492“493
122“123, 172 Nonrecurring items, 472
subscribers, 68 put options, 48“48, 492
Risk Adjusted rating, 708“709 Nonsystematic risk, 171,
trading in, 76“77 versus stocks, 500“504
Morningstar Mutual Funds, 747 199, 224
trading through on, 77 value at expiration
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-10 Index

Options”Cont. Passive strategies, 155 Personal trust, 602“603 Portfolio management”Cont.
call options, 498“499 and capital market line, 155“158 Pfizer, 9 passive, 155“158, 350“357
compared to stocks, 500“504 costs and benefits, 158 Pierallini, Fabrizio, 586 performance attribution
put options, 499“500 efficiency of, 223 Pinkerton, John, 263 procedures, 693“699
Options market/trading Pass-through securities, 16“17, Pink sheets, 67 performance evaluation, 684“699
Chicago Board Options 32“33, 38“39 Pitt, Harvey, 477 rebalancing, 355
Exchange, 491 Pass-through status, 111 Plowback ratio, 421, 464“465 right mix, 155
foreign currency options, 497 Patell, James M., 264 effect on growth and risk reduction, 608
futures options, 496 Paying for order flow, 82 P/E ratio, 430 role in efficient market, 268
index options, 496 Pay-in-kind bonds, 302 Plus tick, 90 soft-dollar credits, 110“112
interest rate options, 498 Peak, 391 Point and figure chart, 663 stock market futures, 586
naked option writing, 506 P/E effect, 274, 280 Political risk, 731“732 tax-timing option, 638
Option Clearing Corporation, PEG ratio, 431“432 Porter, Michael E., 404 three rules for two risky
495“496 P/E multiple, 384 Portfolio, 8; see also Complete assets, 177
over-the-counter market, 493 Penn Central bankruptcy, 28, 30 portfolio; Market portfolio Portfolio managers, 701“702
strategies Penn Square Bank, 30 apart from labor income, 645 Portfolio risk, 122
collars, 511“512 Pension actuary, 604 arbitrage, 244 adjusting for, 273
covered calls, 506“508 Pension Benefit Guaranty diversified, 10 and diversification, 10, 170“171
protective put, 504“506 Corporation, 621 efficient, 226 key determinants, 171“172
spreads, 508“510 Pension funds in efficient frontier, 190 mutual funds, 114
straddle, 508 constraints and objectives, expected return and risk, 151“152 and risk premium, 224
trading mechanisms, 493“495 610, 611 of foreign stocks, 15“16 single-factor asset market,
Option valuation and immunization, 350 historical record, 139“146 192“199
binomial pricing interest rate risk, 350 home-country bias, 726 Posit, 69
generalized two-state investment objectives, 604 of households, 13 Positive correlation, 180
approach, 537“540 losses during market boom, 351 mean-variance criterion, 178“182 Positive serial correlation, 270“271
two-state pricing, 534“537 PepsiCo, Inc., 452, 453, 454, 455, modern theory of, 10 Post-earnings announcements price
Black-Scholes formula, 540“546 465“466 optimal risky, 184“187 drift, 276“278
Black-Scholes model Percentage margin, 82“83 passive, 158 Poterba, James, 271n
empirical evidence, 556“557 Perfect hedge, 536 perfectly hedged, 540 Preferred stock, 41
hedge ratios, 550“552 Perfect negative correlation, 181“182 rebalancing, 612 convertible, 514“516
portfolio insurance, 552“556 Perfect positive correlation, 180 satisfactory, 131 as fixed-income security,
put-call parity relationship, Performance evaluation standard deviation, 178, 180 300“301
546“549 bonds vs. stocks, 157 turnover rate, 111“112 Premium bonds, 308, 310, 319
put option valuation, for efficient markets, 270“275 with two risky assets, 171“184 Premium of options, 53, 492
549“550 in industry analysis, 404“405 zero-investment, 242 Present value, 216, 343, 580“581
simplifying assumptions, 543 industry stock prices, 398 Portfolio choice, 192 of annuity, 303“304
determinants, 533“534 market timing, 691“693, Portfolio composition, 691“693 of bonds, 303“304
implied volatility, 543“544 705“706 Portfolio construction, 131 Present value formula, 312“313
intrinsic and time values, 532 of money managers, 694“695 asset allocation, 695 Present value of growth
and replication, 535“536 Morningstar™s risk-adjusted bottom-up, 9 opportunities, 422, 423, 429
Organization of Petroleum Exporting rating, 708“709 diversification with many risky Price appreciation/depreciation
Countries, 30 mutual funds, 114“118, 281“286 assets, 187“192 built-in, 315
Original issue discount bonds, performance attribution with foreign assets, 745“746 and company stock, 300
314“316 procedures, 693“699 immunized portfolio, 356 corporate bonds, 298
Outlook (S&P), 478 asset allocation mean-variance criterion, 178“182 Price continuity, 75
Out-of-the-money options, 493, decisions, 697 optimization technique, 192 Price discovery, 77
496, 501 bogey benchmark, 694“695, top-down, 9 Price-earnings multiple, 429“430
Overconfidence, 280“281 696, 745 with Treynor-Black model, Price-earnings ratio, 41, 274,
Overreaction, 656“657 cash/bond selection, 748 709“712 464“465
Over-the-counter market, 14“15, country selection, 746“747 with two risky assets, 171“182 and business cycles, 435
67“68 currency selection, 746 Portfolio dividend yield, 190 combined with dividend discount
bond trading, 70, 298“299 international investments, Portfolio duration, 351“353 models, 438
options trading, 493 746“747 Portfolio insurance, 552“556 forecast of, 440
self-regulation, 89“91 sector/security selection, Portfolio management and growth opportunities,
trading on, 76“77 697“698 active, 361“366 429“432
stock selection, 747 active vs. passive, 267“268 pitfalls in analysis, 434“436
P summing up component asset allocation, 148“155 and stock risk, 432“433
contributions, 698“699 bond portfolios, 339“368 Price-earnings ratio equation, 432
Pacific Stock Exchange, 65
rates of return, 139“146 and convexity, 358“361 Price-fixing agreements, 50
Palmon, Dan, 278
risk-adjusted returns duration concept, 344 Price improvements, 72
Par value, 296, 312
with changing portfolio hedge ratio tool, 551“552 Price-indexed government bond, 150
Passive bond management, 339
composition, 691“693 interest rate swaps, 366“368 Price level deflator, 628“629
cash flow matching, 357“358
choosing right measure, investment companies, 100“101 Priceline.com, 432
dedication strategy, 357“358
688“691 investment policies, 104“107 Price priority, 77
immunization, 350“357

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