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rebalancing portfolio, 355, 356

M2 measure, 686â€“688 lure of active management, Price risk, 351â€“352

Passive core strategy, 613 risk adjustments, 685â€“686 699â€“702 Prices

Passive investment policy, 614â€“615 style analysis, 706â€“708 monitoring and revising, 615â€“616 and inflation, 146â€“147

Passive investment strategy, 267 Treynor-Black model, 710 mutual fund performance, versus net asset value, 102

Passive portfolio management, 10 Perpetuity, 348 114â€“118, 281â€“286 open-end funds, 103

and efficient markets, 597 Personal funds, 113â€“114 mutual funds, 13 Price-to-book ratio, 438

and EMH, 267â€“268

Bodieâˆ’Kaneâˆ’Marcus: Back Matter Index Â© The McGrawâˆ’Hill

Essentials of Investments, Companies, 2003

Fifth Edition

I-11

Index

Price-to-cash flow ratio, 438 Rates of returnâ€”Cont. Return on equityâ€”Cont.

Real interest rate, 147, 472

Price-to-sales ratio, 438 after-tax, 607 determinants, 386â€“387 financial leverage, 456

PricewaterhouseCoopers, 473 alpha, 227 Realized compound yield, 310â€“312 past vs. future, 456

Price-weighted average, 42â€“43 annualized, 31â€“32 Realized rate of return index Return on sales, 459

Primary Insurance Amount, 640, average, 157â€“158, 212 model, 194 Return requirement, 601

641â€“643 benchmark, 215 Realized return index model, 229 Returns; see also Expected return;

Primary market, 14, 60 bonds vs. equity securities, 157 Real rates of return, 628â€“629 Rates of return

Primary trend, 661 in capital asset pricing model, and inflation, 146â€“148 behavioral explanations, 656â€“659

Primex, 69 225, 233â€“234 Rebalancing, 355, 356 calendar effect, 656

Pring, Michael J., 660n comparisons, 684 Recession, 389, 400â€“401 cash dividends, 656

Prisonerâ€™s dilemma game, 652 conventions for quoting, Redeemable stock, 41 endowment funds, 621

Private placement, 60, 61 134â€“135 Redeemable trust certificates, 101 mean reversion, 656â€“657

Probability distribution, 135â€“137, definition, 132 Red herring, 60 over long horizons, 271â€“272

539â€“540 versus expected rate of Redington, F. M., 350 overreaction to, 656â€“657

Probability-weighted average, 175 return, 129 Refunding, 299 over short horizons, 270â€“271

Procter and Gamble, 50, 293 historical record, 139â€“146 Regional exchanges, 66 risk-adjusted, 274, 282

Producer sentiment, 385 holding-period return, 132 Registered bonds, 298â€“299 Revenue bonds, 33

Product life cycle; see measured over multiple periods, Registration statement, 60 Revenue recognition, 454, 473

Industry life cycle 132â€“134 Regression analysis, 195, 234â€“235 Reversal effect, 272â€“273

Professional investors arithmetic average, 133 Regression equation, 194â€“195 Reverse floaters, 302

mutual funds, 603 dollar-weighted return, 134 Regression toward the mean, 238 Reverse repo, 29

objectives of, 602â€“603 geometric average, 133 Regressive tax, 639 Reversing trade, 573

pension funds, 604 time-weighted average, 133 Regret avoidance, 280 Reward-to-variability ratio,

personal trusts, 602â€“603 mutual funds, 109â€“111 Regulation; see Federal government 152â€“153, 185â€“186, 700â€“701

Profitability, and earnings nominal, 302â€“303 policy; Securities and Exchange common stocks 1926â€“2001, 156

management, 434 pension funds, 604 Commission Riepe, Mark, 747

Profitability ratios, 318 probability distribution, 135â€“137 Reilly, Frank B., 49 Right to purchase, 53

Profit margin, 459 real, 146â€“148 Reinganum, Mark R., 275, 276 Risk, 602â€“603

Pro forma earnings, 434â€“435, 475 required, 415 Reinvestment rate, 310â€“312 allocation of, 7

Program trade, 76, 587 risk and risk premium, 135â€“137 Reinvestment rate risk, 351â€“352 in bond markets, 293

Progressive tax, 633â€“635, 634 scenario analysis, 135â€“137 REITs; see Real estate bond price, 306

Progressive tax code, 632â€“634 single index model, 193â€“194 investment trusts of derivatives, 50

and Roth IRAs, 635â€“636 subperiod data, 156â€“158 Rekenthaler, John, 172 in floating-rate bonds, 300

Proprietary knowledge, 404 total variability, 194 Relative decline stage, 403â€“404 in global environment, 392

Prospectus, 60, 118 with two risky assets, 177 Relative strength, 672â€“673 hedge funds, 104

Protective covenants, 318â€“320 volatility of an option, 551 Rent vs. buy decision, 644 historical record, 139â€“146

Protective put, 504â€“506, 552â€“554 Ratio analysis Replacement cost, 414 insurance principle, 170

Proxy contest, 8, 39 appraisal ratio, 712 Replication, 535â€“536 in international investments,

PRS Group, 731, 734 asset turnover, 459 Repurchase agreements, 29 726â€“731

Prudent investor rule, 602, 607 asset utilization ratio, 461â€“462 Required return, 415 kinds of, 171, 608

Public offerings, 60 book-to-market ratio, 276 Reserve requirement, 390 measures

versus private placement, 61 cash flow-to-debt ratio, 318 Reserves management, 472 standard deviation, 136â€“137

Purchasing power, 146, 383â€“384 choosing a benchmark, 465â€“466 international accounting variance, 136â€“137

Purchasing power risk, 608 comparative valuation conventions, 474â€“475 passive management, 350

Pure yield pickup swap, 362â€“363 ratios, 438 Residual claim, 40 probability distributions,

Put bonds, 300 conversion ratio, 299â€“300 Residual income, 467 135â€“137

Put-call parity relationship, coverage ratio, 318, 462â€“463 Residuals, 231, 233 to retirement annuity, 629

546â€“549, 548 decomposition of ROE, 458â€“460 Residual variance, 196 and risk premium, 135â€“137

Put/call ratio, 669 interest-burden, 459 Resistance level, 661â€“662 scenario analysis, 135â€“137

Putnam, 104 leverage ratio, 318, 460 Retchenstein, William, 282 and speculation, 138

Put options, 49, 53, 492â€“493 liquidity ratios, 318, 462â€“463 Retirement annuity, 626â€“627 three-factor model, 279

and crash of 1987, 501 market price ratios, 463â€“465 alternate savings plan, 629 and time diversification, 212

valuation, 549â€“550 price-earnings ratio, 274, calculation of, 641 Risk Adjusted rating, 708â€“709

value at expiration, 499â€“500 428â€“438, 464â€“465 enhanced by tax shelters, 639 Risk-adjusted returns, 274, 282

PV factor, 304 profitability ratios, 318 real savings plan, 628â€“629 choosing right measure, 688â€“691

PVGO; see Present value of growth profit margin, 459 Retirement plan, 625 comparison universe, 684

opportunities put/call ratio, 669 accounting for inflation, 628â€“629 Jensen measure, 686

M2 measure, 686â€“688

by rating class, 319 accounting for taxation, 630â€“631

risk adjustments, 685â€“686

return on sales, 459 bequests, 646

Q Sharpe measure, 686

Trin statistic, 668 intergenerational transfers, 646

Treynor measure, 686

turnover, 461â€“462 and marriage, 646

Quality of earnings, 472â€“474

with changing portfolio

Rational behavior assumption, 651 and Social Security, 639â€“643

Quanto, 519â€“520

composition, 691â€“693

Raytheon, 427â€“428, 438 and tax shelters, 632â€“639

Quantum Funds, 285

Risk adjustments, 683, 685â€“686

Ready, Mark J., 671 and uncertain liquidity, 645

Quick ratio, 318, 463

with changing portfolio

Real assets, 4â€“5, 269 Return-beta relationships, 245

Quoted bond prices, 298

composition, 691â€“693

versus financial assets, 4 Return on assets, 318, 457â€“458,

Risk and return, 131â€“159

investment in, 6 460, 467

R asset allocation choice, 148â€“155

Real consumption, 628 Return on equity, 421â€“423,

capital allocation line, 152â€“153

Real Estate Investment Trusts, 429â€“431, 456, 464â€“465

Random walks, 262â€“265

capital market line, 155â€“158

103, 644 decomposition of, 458â€“460

Rate anticipation swap, 362

expected return, 151â€“152

Real estate market, 14 effect on growth and

Rates of return

historical data for, 175â€“176

Real exchange rate, 383â€“384 P/E ratio, 430

actual vs. expected, 151

Bodieâˆ’Kaneâˆ’Marcus: Back Matter Index Â© The McGrawâˆ’Hill

Essentials of Investments, Companies, 2003

Fifth Edition

I-12 Index

Risk and returnâ€”Cont. Securitiesâ€”Cont. Securities tradingâ€”Cont.

Rothschild, Tricia, 747

international investments, Rubinsten, Mark, 557 financial assets as, 4 Treasury bills, 27

734â€“738 Rule 415; see Securities and issuance of volume of, 67

national comparisons, 736 Exchange Commission initial public offering, 60â€“65 Websites for, 2, 59

passive strategies, 155â€“158 Rule 144A; see Securities and by investment bankers, 60â€“61 Securitization, 16â€“17

risk tolerance and asset Exchange Commission private placement, 60, 61 Security analysis, 9; see also Equity

allocation, 154â€“155 Russell 2000 Index, 46, 106, 139, public offering, 60 valuation; Fundamental

with two risky assets, 172â€“173 267â€“267 seasoned issues, 60 analysis; Technical analysis

Risk aversion, 137â€“139, 138, 154, Rydqvist, K., 64 shelf-registration, 61 and country-specific risk,

226, 600 underpricing, 63 731â€“734

Risk-based capital guidelines, 350 mispriced, 413 federal government policies,

S

Risk control, 131 optionlike, 512â€“517 388â€“390

Risk-free assets, 150â€“151, 191â€“192 Securities Act Amendments of fundamental analysis, 381

Saitori, 79

optimal risky portfolio, 184â€“187 1975, 69 Graham technique, 477â€“478

Sales sensitivity, 399

Risk-free interest rate, 303 Securities Act of 1933, 89 industry life cycle, 401â€“405

Salomon Brothers, 589â€“590, 745

Risk-free portfolio, 148â€“155 Securities and Exchange Commission, skills needed for, 379

Salomon Smith Barney, 13, 47, 49,

Risk-free rate, 137, 153, 28, 301, 473, 477 with Treynor-Black model,

69, 70, 513

232â€“233, 704 establishment of, 89 709â€“712

Samuelson, Paul A., 285, 441

Riskless arbitrage, 247 and fourth market, 69 Security Analysis (Graham &

Samurai bonds, 33, 301

Riskless arbitrage opportunity, and globalization, 81 Dodd), 478

Sanford Bernstein and Company,

242, 246 on inside information, 278 Security characteristic line, 195,

364â€“366

Risk management, 506 and insider trading, 91 231â€“232

Sarkar, Asani, 752

with derivatives, 6 mutual fund prospectus, 118 Security Exchange Act of 1934, 265

Saving, 601

Risk Management Association, 465 mutual fund rules, 112 Security market line, 226â€“227,

by households, 626

Risk pooling, 211 NASD settlement, 77 235â€“237, 247, 249

irrational decisions, 655

Risk premium, 137 national securities market, 69â€“70 Security prices

for long run, 626â€“627

anomalies as expressions of, 279 Official Summary of Insider anomalies, 651

objectives, 625

common stocks 1926â€“2001, 156 Trading, 278 and efficient markets, 10

reasons for, 626

of complete portfolio, 152 Official Summary of and market demand, 220

retirement annuity, 626â€“627

debate about, 157â€“158 Securities Transactions no-arbitrage restrictions, 215

sheltered vs. unsheltered,

versus inefficiencies, 278â€“279 and Holdings, 91 Security selection, 8â€“9, 697â€“698

638â€“639

of market portfolio, 223â€“224 registration statement, 60 Treynor-Black model, 710

Savings and loan associations,

on market portfolio, 222 regulation of markets, 89â€“92 Seefeld, Steve, 513

605â€“606

ratio of beta to, 224â€“226 Rule 415, 61 Selection bias issue, 269â€“270

Savings plan

and risk aversion, 137â€“139 Rule 144A, 61 Self-destructing patterns, 660, 675

accounting for inflation, 628â€“629

worldwide, 157 Rule 10b-5, 265 Self-regulation, 89â€“91

accounting for taxation, 630â€“631

Risk reduction, 608 12b-1 fees, 108â€“109 Sell-at-market order, 72

accounting for taxes, 630â€“631

Risk-return opportunity set, 189â€“190 Securities Exchange Act of 1934, 89 Semistrong-form EMH, 265

bequests, 646

Risk-return trade-off, 4, 9â€“10, 138 Securities Investor Protection Semistrong-form tests, 273â€“278

for college costs, 643â€“644

mix of investments, 155 Act, 89 Sentiment indicators, 667

contingencies, 645

risk-free asset, 150â€“151 Securities trading confidence index, 669

and home ownership, 644

risky assets, 149â€“150 and ADRs, 734 mutual fund cash position, 669

intergenerational transfers, 646

with two risky-asset portfolio, bid-ask spread, 67 odd-lot theory, 668

for large purchases, 643â€“644

177â€“178 block sales, 75â€“76 put/call ratio, 669

marriage, 646

Risk sharing, 211 bond trading, 70 Trin statistic, 668

real and alternative, 628â€“629

Risk stability, 732â€“733 buying on margin, 82â€“86 Separate Trading of Registered

uncertain liquidity, 645

Risk structure of interest rates, 322 dollar volume in 2000, 78 Interest and Principal

using tax shelters, 632â€“639

Risk tolerance, 600 on exchanges, 71â€“76 Securities, 315

SBC Communications, 43

assessing, 602â€“603 exchange traded funds, 112â€“114 Separation of ownership and

Scatter diagram, 195

and asset allocation, 154â€“155 execution of trades, 74â€“75 management, 7â€“8

Scenario analysis, 135â€“137, 136

Risky assets, 149â€“150 financial market structure, 11â€“15 Separation property, 192

Scherbina, Anna, 158, 427n

diversification with many, foreign index funds, 737 Serial bond issue, 319â€“320

Schiller, Robert J., 658â€“659

187â€“192 in foreign securities, 15â€“16 Serial correlation, 270â€“271

Schlarbaum, G., 565, 657

diversification with two, 171â€“184 fourth market, 68â€“69 Settlement, 76

Scholes, Myron, 241, 540

efficient frontier, 188â€“191 futures markets, 571â€“577 70 percent exclusion, 41

Scudder Kemper Investments, 602

Risky debt, 517â€“519 globalization and SEC, 81 Seyhun, H. Nejat, 278

Sears, Roebuck, 43

Risky portfolio, 148â€“155 national comparisons, 77â€“79 Shareholders

Seats on exchanges, 65

reasons for holding, 222 national securities market, of common stock, 39â€“40

Secondary market, 15, 60

Sharpe measure, 712 69â€“70 limited liability, 40

bond sales, 306

sources of uncertainty, 170 odd-lot trading, 668â€“669 proxy contests, 8

over-the-counter market, 67â€“68

and tax shelters, 637â€“638 online, 1, 19â€“20 residual claim, 40

stock exchanges, 65â€“67

with two risky assets, 171â€“184 over-the-counter market, 67â€“68, Shareholdersâ€™ equity, 452â€“454

Treasury bill purchase, 27

Ritter, Jay R., 64, 272, 275 76â€“77 Sharpe, William F., 10, 193, 215, 221,

Secondary trend, 661

Road shows, 62 program trade, 76 240, 241, 685, 706â€“709

Sector rotation, 400â€“401

Robert Morris Associates, 465 in secondary markets, 65â€“67 Sharpe measure, 686, 687, 688, 692,

Sector selection, 697â€“698

Roberts, Harry, 270, 665, 666 settlement, 76 693, 701â€“702, 709, 711â€“172

Secured bonds, 36

Roll, Richard, 241, 556, 743, 744 short sales, 86â€“88 Shelf registration, 61

Securities; see also Bonds; Equity

Rollover strategy, 324â€“325 in stock exchanges, 65â€“67 Shevlin, Terry, 277

securities; Financial

Ross, Stephen A., 216, 241â€“242, 317, SuperDot System, 76 Shiller, Robert J., 272n, 273

Instruments; Stocks

539n, 657â€“658 third market, 68 Shliefer, Andrei, 279

asset-backed, 16â€“17

Roth IRAs, 635 trading costs, 80â€“82 Short interest, 669â€“670

convertible, 514â€“516

tax deferred, 639 transaction costs, 676â€“677 Short position, 52, 53, 567â€“570

creation of, 18â€“19

Bodieâˆ’Kaneâˆ’Marcus: Back Matter Index Â© The McGrawâˆ’Hill

Essentials of Investments, Companies, 2003

Fifth Edition

I-13

Index

Short-sale restrictions, 190 Standard & Poorâ€™s 500 Indexâ€”Cont. Stock marketâ€”Cont. Super Bowl theory, 665

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