Investment Analysis chaps 7, 8, 10

creation of riskless profits made possible by relative mispricing among securities.

a theory of risk-return relationships derived from no-arbitrage considerations in large capital markets.

a model that relates the required rate of return on a security to its systematic risk as measured by beta.

implication of the CAPM that security risk premiums should be proportional to beta.

a well-diversified portfolio constructed to have a beta of 1 on one factor and a beta of 0 on any other factor.

models of security markets positing that returns respond to several systematic factors.

patterns of returns that seem to contradict the efficient market hypothesis.

the tendency for investments in share of firms with high ratios of book value to market value to generate abnormal returns.

refers to the tendency for smallr companies (small-cap stocks) to outperform larger companies (large-cap stocks) in terms of investment return over time. This phenomenom suggests that smaller companies often offer higher growth potential, but they also come at higher risk.

the tendency of poorly performing stocks and well-perforing stocks in one period to continute that abnormal performance in following periods.

the hypothesis that prices of securities fully reflect the available information about securities.

weak-form- the assertion that stock prices already reflect all information contained in the history of past trading.

semistrong-form- the assertion that stock prices already reflect all publicly available information.

strong-form- the assertion that stock prices reflect all revelant information, including inside information.

research on determinants of stock value, such as earnings and dividends prospects, expectations for future interest rates, and risk of the firm.

a mutual fund holding shares in proportion to their representation in a market index such as the S&P 500

involves buying and holding investments (such as stocks, bonds, or mutual funds) for long term, with minimal buying and selling. The goal is to match, rather than outperform, the market.

the notion that stock price changes are random and unpredictable.

research on recurrent and predictable stock patterns and on proxies for buy or sell pressure in the market.

chartism- focusing on studying charts and patterns to predict future stock price movements.

a security that obligates the issuer to make specified payments to the holder over a period of time.

the payment to the bondholder at the maturity of the bond.

a bond's annual interest payment per dollar of par value.

bonds are typically issued with these up to 30 years.

however, these can range from 50-100 years.

bonds that may be repurchased by the issuer at a specified call price during the call period.

the discount rate that makes the present value of a bond's payment equal to its price.

a bond with an option allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm.

annual coupon divided by bond price.

bonds selling above par value.

bonds selling below par value.

a bond rated BBB and above by Standard & Poor's or Baa and above by Moody's.

a bond rated BB or lower by Standard & Poor's or Baa and below by Moody's

a specific asset pledged against possible default on a bond.

a bond not backed by specific collateral.

a graph as yield to maturity as a function of term to maturity.