Widely known indexes include the Bloomberg Barclays U.S. As a result, the most commonly used indexes are those created by large broker-dealers that buy and sell bonds, including Bloomberg Barclays Capital (which now also manages the indexes originally created by Lehman Brothers), Citigroup, J.P. Because stocks trade on open exchanges and prices are public, the major indexes are maintained by publishing companies like Dow Jones and the Financial Times, or the stock exchanges.įixed income securities do not trade on open exchanges, and bond prices are therefore less transparent. Numerous other equity indexes have been designed to track the performance of various market sectors and segments. Using an index, it is possible to see how much value an active manager adds and from where, or through what investments, that value comes. ![]() Indexes represent a “passive” investment approach and can provide a good benchmark against which to compare the performance of a portfolio that is actively managed. Because indexes are unmanaged, they track returns on a buy-and-hold basis and no trades are made to reallocate to securities that may be more attractive over different market cycles or market events. An index tracks the performance of a broad asset class, such as all listed stocks, or a narrower slice of the market, such as technology company stocks. In most cases, investors choose a market index, or combination of indexes, to serve as the portfolio benchmark. Volatility: A statistical measure of the dispersion of returns for a given security or market index.It is typically calculated as the standard deviation of the difference in the portfolio and benchmark returns over time. Tracking error: The difference between a portfolio’s returns and the benchmark or index.Liabilities: A company’s legal debt or obligation that arises during the course of business operations.Inflation-adjusted return: A measure of return that takes into account the time period’s inflation rate.Equities: Ownership or proprietary rights and interests in a company – synonymous with common stock.Duration measures the sensitivity of a bond or portfolio’s price to changes in interest rates. Duration: A measure of average maturity that incorporates a bond’s yield, coupon, final maturity and call features into one measure.Dividends: A cash or other distribution to preferred or common stockholders. ![]() ![]()
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