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sector investment strategy
Limiting investments to securities issued by companies that
operate in a particular industry sector, such as finance,
energy, healthcare or high-tech. Some managers pursue
multi-sector strategies that involve more than one sector.
Stands for Stock Exchange Daily Official List. A 7-digit
numeric or alphanumeric code assigned by the International
Stock Exchange in London.
The portion of the securities business in which orders are
transacted. The sell side includes retail brokers,
institutional brokers and traders, and research departments.
If an institutional portfolio manager changes jobs and becomes
a registered representative, he or she has moved from the buy
side to the sell side
Synonymous with a transaction's closing, when, after clearing
has taken place, securities are delivered and payment is
A risk-adjusted measure developed by William F. Sharpe,
calculated using standard deviation and excess return to
determine reward per unit of risk. The higher the Sharpe
ratio, the better the fund's historical The implication of
this arrangement is that the Sharpe ratio is a measurement of
return per unit of risk. It is for this reason that an
investment’s Sharpe ratio is generally considered to be
improving as its value increases, and vice versa. Since any
such change reflects the net effect of changes to any and all
factors involved in its calculation, additional insight into
the value of an investment’s Sharpe ratio may be provided by
careful consideration of all the components on a case-by-case
A strategy that emphasizes short sales of securities. Such funds tend to
hold larger short positions than long positions.
An approach that seeks to profit exclusively by short
sales—taking short positions in securities whose values the
fund manager believes will fall.
short-term trading strategy
An approach in which the fund manager focuses on
opportunistic trades, holding investments for only brief
periods. Such funds often engage in "day trading."
small cap/micro cap
Purchasing stocks issued by small companies. Small-cap
companies generally have $250 million to $1 billion of market
capitalization, while micro-cap companies have less than $250
million of market capitalization.
A variation of the Sharpe ratio which differentiates
harmful volatility from volatility in general using a value
for downside deviation. The Sortino ratio is the excess return
over risk-free rate over the downside semi-variance, so it
measures the return to "bad" volatility. This ratio
allows investors to assess risk in a better manner than simply
looking at excess returns to total volatility, since such a
measure does not consider how often the price of the security
rises as opposed to how often it falls.
An operation for an immediate one time exchange of
currencies contracted with a counterparty using the relevant
For an investment portfolio, it measures the variation of
returns around the portfolios mean-average return. In other
words, it expresses an investment's historical volatility. The
further the variation from the average return, the higher the
A market-neutral investment strategy that seeks to
simultaneously profit and limit risk by exploiting pricing
inefficiencies identified by mathematical models. The strategy
often involves short-term bets that prices will trend toward
their historical norms.
An approach that seeks to take advantage of differences
between a stock's current price and its expected future price
by buying a group of stocks and shorting futures contracts in
the corresponding index—or by purchasing the futures
contracts and short selling the stock.
Purchase in amount or in kind of a fund from a current
The theoretical over-estimation of historic returns for the hedge-fund
industry that results from the tendency of poor-performing
hedge funds to drop out of an index while strong performers
continue to be tracked. The result is a sample of current
funds that includes those that have been successful in the
past, while many funds that underperformed are not included.
An operation that combines a SPOT and a FORWARD operation
for the same amount of one of the currencies. It uses both the
spot and forward rates.
For evaluation purposes, an unrealized gain/loss is calculated
for the FORWARD portion of the SWAP as the valuation date
approaches the forward contract maturity date.
An agreement to exchange currencies, commodities, interest
payments, investment returns, or cash flows, either at
present or at a future date. Swaps are
a form of derivatives. Interest-rate swaps are the most common
type of sway. They are used to convert a fixed-rate investment into a floating-rate
investment, or vice versa.
Society for Worldwide Interbank Financial
Telecommunication. An organization that operates the
major interbank electronic communication system for financial
messages (payments, letters of credit, securities transactions
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