Module 10 Study Note Flashcard

A theory that states all available information is already reflected in stock prices, making it impossible to consistently achieve higher returns without taking on more risk.

It provides a quicker and more efficient process for offering new products, reducing time to market.

The process of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash.

The risk inherent to the entire market or market segment, also known as market risk, which cannot be eliminated through diversification.

Equities, bonds, cash equivalents, and alternative investments.

A theory on how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk.

A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset or risk.

An investment vehicle that pools money from many investors to purchase a diversified portfolio of securities.

The measure of an investment's performance on a risk-adjusted basis, compared to a benchmark index.

A model used to determine the expected return on an investment based on its systematic risk (beta), the risk-free rate, and the expected market return.

A measure of a stock's volatility in relation to the overall market. A beta of 1 indicates that the stock moves with the market.

A financial instrument whose value is derived from the value of an underlying asset, index, or rate. Examples include options, futures, and swaps.

The ease with which an asset can be converted into cash without affecting its market price.

A measure of risk-adjusted performance that indicates the average return earned in excess of the risk-free rate per unit of volatility or total risk.

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.

A method of evaluating a security by attempting to measure its intrinsic value based on financial and economic analysis.

The process of identifying, assessing, and controlling threats to an organization's capital and earnings, including market risk, credit risk, and operational risk.

A pooled investment fund that employs various strategies to earn active return, or alpha, for its investors. Hedge funds may be aggressively managed or use derivatives.

An investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.

An investment strategy where a fixed dollar amount of shares is purchased regularly regardless of the share price, reducing the impact of volatility.

A type of investment fund and exchange-traded product that holds assets such as stocks, commodities, or bonds and is traded on stock exchanges.

An investment strategy that focuses on companies that are expected to grow at an above-average rate compared to other companies.

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis, without reference to its market value.

The study of the influence of psychology on the behavior of investors or financial practitioners and the subsequent effect on markets.

The process of realigning the weightings of a portfolio of assets by periodically buying or selling assets to maintain the original desired level of asset allocation.

A financial system that operates according to Islamic law (Sharia), which prohibits interest (riba) and investing in businesses that are considered haram (forbidden).

An investment strategy that aims to replicate the performance of a specific benchmark or index, typically by holding a similar portfolio of securities.

A measure of how frequently assets within a fund are bought and sold by the managers, often expressed as a percentage of the portfolio.

The income return on an investment, such as the interest or dividends received from holding a particular security.

The process through which a private company offers shares to the public for the first time to raise capital.