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comparison universe, 694 life-cycle approach, 621 Price quotation system, 68, 76
rebalancing portfolio, 355, 356
M2 measure, 686“688 lure of active management, Price risk, 351“352
Passive core strategy, 613 risk adjustments, 685“686 699“702 Prices
Passive investment policy, 614“615 style analysis, 706“708 monitoring and revising, 615“616 and inflation, 146“147
Passive investment strategy, 267 Treynor-Black model, 710 mutual fund performance, versus net asset value, 102
Passive portfolio management, 10 Perpetuity, 348 114“118, 281“286 open-end funds, 103
and efficient markets, 597 Personal funds, 113“114 mutual funds, 13 Price-to-book ratio, 438
and EMH, 267“268
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-11
Index

Price-to-cash flow ratio, 438 Rates of return”Cont. Return on equity”Cont.
Real interest rate, 147, 472
Price-to-sales ratio, 438 after-tax, 607 determinants, 386“387 financial leverage, 456
PricewaterhouseCoopers, 473 alpha, 227 Realized compound yield, 310“312 past vs. future, 456
Price-weighted average, 42“43 annualized, 31“32 Realized rate of return index Return on sales, 459
Primary Insurance Amount, 640, average, 157“158, 212 model, 194 Return requirement, 601
641“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, 628“629 Rates of return
Primary trend, 661 in capital asset pricing model, and inflation, 146“148 behavioral explanations, 656“659
Primex, 69 225, 233“234 Rebalancing, 355, 356 calendar effect, 656
Pring, Michael J., 660n comparisons, 684 Recession, 389, 400“401 cash dividends, 656
Prisoner™s dilemma game, 652 conventions for quoting, Redeemable stock, 41 endowment funds, 621
Private placement, 60, 61 134“135 Redeemable trust certificates, 101 mean reversion, 656“657
Probability distribution, 135“137, definition, 132 Red herring, 60 over long horizons, 271“272
539“540 versus expected rate of Redington, F. M., 350 overreaction to, 656“657
Probability-weighted average, 175 return, 129 Refunding, 299 over short horizons, 270“271
Procter and Gamble, 50, 293 historical record, 139“146 Regional exchanges, 66 risk-adjusted, 274, 282
Producer sentiment, 385 holding-period return, 132 Registered bonds, 298“299 Revenue bonds, 33
Product life cycle; see measured over multiple periods, Registration statement, 60 Revenue recognition, 454, 473
Industry life cycle 132“134 Regression analysis, 195, 234“235 Reversal effect, 272“273
Professional investors arithmetic average, 133 Regression equation, 194“195 Reverse floaters, 302
mutual funds, 603 dollar-weighted return, 134 Regression toward the mean, 238 Reverse repo, 29
objectives of, 602“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, 602“603 mutual funds, 109“111 Regulation; see Federal government 152“153, 185“186, 700“701
Profitability, and earnings nominal, 302“303 policy; Securities and Exchange common stocks 1926“2001, 156
management, 434 pension funds, 604 Commission Riepe, Mark, 747
Profitability ratios, 318 probability distribution, 135“137 Reilly, Frank B., 49 Right to purchase, 53
Profit margin, 459 real, 146“148 Reinganum, Mark R., 275, 276 Risk, 602“603
Pro forma earnings, 434“435, 475 required, 415 Reinvestment rate, 310“312 allocation of, 7
Program trade, 76, 587 risk and risk premium, 135“137 Reinvestment rate risk, 351“352 in bond markets, 293
Progressive tax, 633“635, 634 scenario analysis, 135“137 REITs; see Real estate bond price, 306
Progressive tax code, 632“634 single index model, 193“194 investment trusts of derivatives, 50
and Roth IRAs, 635“636 subperiod data, 156“158 Rekenthaler, John, 172 in floating-rate bonds, 300
Proprietary knowledge, 404 total variability, 194 Relative decline stage, 403“404 in global environment, 392
Prospectus, 60, 118 with two risky assets, 177 Relative strength, 672“673 hedge funds, 104
Protective covenants, 318“320 volatility of an option, 551 Rent vs. buy decision, 644 historical record, 139“146
Protective put, 504“506, 552“554 Ratio analysis Replacement cost, 414 insurance principle, 170
Proxy contest, 8, 39 appraisal ratio, 712 Replication, 535“536 in international investments,
PRS Group, 731, 734 asset turnover, 459 Repurchase agreements, 29 726“731
Prudent investor rule, 602, 607 asset utilization ratio, 461“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, 136“137
Purchasing power, 146, 383“384 choosing a benchmark, 465“466 international accounting variance, 136“137
Purchasing power risk, 608 comparative valuation conventions, 474“475 passive management, 350
Pure yield pickup swap, 362“363 ratios, 438 Residual claim, 40 probability distributions,
Put bonds, 300 conversion ratio, 299“300 Residual income, 467 135“137
Put-call parity relationship, coverage ratio, 318, 462“463 Residuals, 231, 233 to retirement annuity, 629
546“549, 548 decomposition of ROE, 458“460 Residual variance, 196 and risk premium, 135“137
Put/call ratio, 669 interest-burden, 459 Resistance level, 661“662 scenario analysis, 135“137
Putnam, 104 leverage ratio, 318, 460 Retchenstein, William, 282 and speculation, 138
Put options, 49, 53, 492“493 liquidity ratios, 318, 462“463 Retirement annuity, 626“627 three-factor model, 279
and crash of 1987, 501 market price ratios, 463“465 alternate savings plan, 629 and time diversification, 212
valuation, 549“550 price-earnings ratio, 274, calculation of, 641 Risk Adjusted rating, 708“709
value at expiration, 499“500 428“438, 464“465 enhanced by tax shelters, 639 Risk-adjusted returns, 274, 282
PV factor, 304 profitability ratios, 318 real savings plan, 628“629 choosing right measure, 688“691
PVGO; see Present value of growth profit margin, 459 Retirement plan, 625 comparison universe, 684
opportunities put/call ratio, 669 accounting for inflation, 628“629 Jensen measure, 686
M2 measure, 686“688
by rating class, 319 accounting for taxation, 630“631
risk adjustments, 685“686
return on sales, 459 bequests, 646
Q Sharpe measure, 686
Trin statistic, 668 intergenerational transfers, 646
Treynor measure, 686
turnover, 461“462 and marriage, 646
Quality of earnings, 472“474
with changing portfolio
Rational behavior assumption, 651 and Social Security, 639“643
Quanto, 519“520
composition, 691“693
Raytheon, 427“428, 438 and tax shelters, 632“639
Quantum Funds, 285
Risk adjustments, 683, 685“686
Ready, Mark J., 671 and uncertain liquidity, 645
Quick ratio, 318, 463
with changing portfolio
Real assets, 4“5, 269 Return-beta relationships, 245
Quoted bond prices, 298
composition, 691“693
versus financial assets, 4 Return on assets, 318, 457“458,
Risk and return, 131“159
investment in, 6 460, 467
R asset allocation choice, 148“155
Real consumption, 628 Return on equity, 421“423,
capital allocation line, 152“153
Real Estate Investment Trusts, 429“431, 456, 464“465
Random walks, 262“265
capital market line, 155“158
103, 644 decomposition of, 458“460
Rate anticipation swap, 362
expected return, 151“152
Real estate market, 14 effect on growth and
Rates of return
historical data for, 175“176
Real exchange rate, 383“384 P/E ratio, 430
actual vs. expected, 151
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-12 Index

Risk and return”Cont. Securities”Cont. Securities trading”Cont.
Rothschild, Tricia, 747
international investments, Rubinsten, Mark, 557 financial assets as, 4 Treasury bills, 27
734“738 Rule 415; see Securities and issuance of volume of, 67
national comparisons, 736 Exchange Commission initial public offering, 60“65 Websites for, 2, 59
passive strategies, 155“158 Rule 144A; see Securities and by investment bankers, 60“61 Securitization, 16“17
risk tolerance and asset Exchange Commission private placement, 60, 61 Security analysis, 9; see also Equity
allocation, 154“155 Russell 2000 Index, 46, 106, 139, public offering, 60 valuation; Fundamental
with two risky assets, 172“173 267“267 seasoned issues, 60 analysis; Technical analysis
Risk aversion, 137“139, 138, 154, Rydqvist, K., 64 shelf-registration, 61 and country-specific risk,
226, 600 underpricing, 63 731“734
Risk-based capital guidelines, 350 mispriced, 413 federal government policies,
S
Risk control, 131 optionlike, 512“517 388“390
Risk-free assets, 150“151, 191“192 Securities Act Amendments of fundamental analysis, 381
Saitori, 79
optimal risky portfolio, 184“187 1975, 69 Graham technique, 477“478
Sales sensitivity, 399
Risk-free interest rate, 303 Securities Act of 1933, 89 industry life cycle, 401“405
Salomon Brothers, 589“590, 745
Risk-free portfolio, 148“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
232“233, 704 establishment of, 89 709“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,
364“366
Risk management, 506 and insider trading, 91 231“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, 226“227,
by households, 626
Risk pooling, 211 NASD settlement, 77 235“237, 247, 249
irrational decisions, 655
Risk premium, 137 national securities market, 69“70 Security prices
for long run, 626“627
anomalies as expressions of, 279 Official Summary of Insider anomalies, 651
objectives, 625
common stocks 1926“2001, 156 Trading, 278 and efficient markets, 10
reasons for, 626
of complete portfolio, 152 Official Summary of and market demand, 220
retirement annuity, 626“627
debate about, 157“158 Securities Transactions no-arbitrage restrictions, 215
sheltered vs. unsheltered,
versus inefficiencies, 278“279 and Holdings, 91 Security selection, 8“9, 697“698
638“639
of market portfolio, 223“224 registration statement, 60 Treynor-Black model, 710
Savings and loan associations,
on market portfolio, 222 regulation of markets, 89“92 Seefeld, Steve, 513
605“606
ratio of beta to, 224“226 Rule 415, 61 Selection bias issue, 269“270
Savings plan
and risk aversion, 137“139 Rule 144A, 61 Self-destructing patterns, 660, 675
accounting for inflation, 628“629
worldwide, 157 Rule 10b-5, 265 Self-regulation, 89“91
accounting for taxation, 630“631
Risk reduction, 608 12b-1 fees, 108“109 Sell-at-market order, 72
accounting for taxes, 630“631
Risk-return opportunity set, 189“190 Securities Exchange Act of 1934, 89 Semistrong-form EMH, 265
bequests, 646
Risk-return trade-off, 4, 9“10, 138 Securities Investor Protection Semistrong-form tests, 273“278
for college costs, 643“644
mix of investments, 155 Act, 89 Sentiment indicators, 667
contingencies, 645
risk-free asset, 150“151 Securities trading confidence index, 669
and home ownership, 644
risky assets, 149“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, 643“644
177“178 block sales, 75“76 put/call ratio, 669
marriage, 646
Risk sharing, 211 bond trading, 70 Trin statistic, 668
real and alternative, 628“629
Risk stability, 732“733 buying on margin, 82“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, 632“639
Risk tolerance, 600 on exchanges, 71“76 Securities, 315
SBC Communications, 43
assessing, 602“603 exchange traded funds, 112“114 Separation of ownership and
Scatter diagram, 195
and asset allocation, 154“155 execution of trades, 74“75 management, 7“8
Scenario analysis, 135“137, 136
Risky assets, 149“150 financial market structure, 11“15 Separation property, 192
Scherbina, Anna, 158, 427n
diversification with many, foreign index funds, 737 Serial bond issue, 319“320
Schiller, Robert J., 658“659
187“192 in foreign securities, 15“16 Serial correlation, 270“271
Schlarbaum, G., 565, 657
diversification with two, 171“184 fourth market, 68“69 Settlement, 76
Scholes, Myron, 241, 540
efficient frontier, 188“191 futures markets, 571“577 70 percent exclusion, 41
Scudder Kemper Investments, 602
Risky debt, 517“519 globalization and SEC, 81 Seyhun, H. Nejat, 278
Sears, Roebuck, 43
Risky portfolio, 148“155 national comparisons, 77“79 Shareholders
Seats on exchanges, 65
reasons for holding, 222 national securities market, of common stock, 39“40
Secondary market, 15, 60
Sharpe measure, 712 69“70 limited liability, 40
bond sales, 306
sources of uncertainty, 170 odd-lot trading, 668“669 proxy contests, 8
over-the-counter market, 67“68
and tax shelters, 637“638 online, 1, 19“20 residual claim, 40
stock exchanges, 65“67
with two risky assets, 171“184 over-the-counter market, 67“68, Shareholders™ equity, 452“454
Treasury bill purchase, 27
Ritter, Jay R., 64, 272, 275 76“77 Sharpe, William F., 10, 193, 215, 221,
Secondary trend, 661
Road shows, 62 program trade, 76 240, 241, 685, 706“709
Sector rotation, 400“401
Robert Morris Associates, 465 in secondary markets, 65“67 Sharpe measure, 686, 687, 688, 692,
Sector selection, 697“698
Roberts, Harry, 270, 665, 666 settlement, 76 693, 701“702, 709, 711“172
Secured bonds, 36
Roll, Richard, 241, 556, 743, 744 short sales, 86“88 Shelf registration, 61
Securities; see also Bonds; Equity
Rollover strategy, 324“325 in stock exchanges, 65“67 Shevlin, Terry, 277
securities; Financial
Ross, Stephen A., 216, 241“242, 317, SuperDot System, 76 Shiller, Robert J., 272n, 273
Instruments; Stocks
539n, 657“658 third market, 68 Shliefer, Andrei, 279
asset-backed, 16“17
Roth IRAs, 635 trading costs, 80“82 Short interest, 669“670
convertible, 514“516
tax deferred, 639 transaction costs, 676“677 Short position, 52, 53, 567“570
creation of, 18“19
Bodie’Kane’Marcus: Back Matter Index © The McGraw’Hill
Essentials of Investments, Companies, 2003
Fifth Edition




I-13
Index

Short-sale restrictions, 190 Standard & Poor™s 500 Index”Cont. Stock market”Cont. Super Bowl theory, 665

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( 193 .)



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