Portfolio Development And Analysis Flashcards

Question

Fundamental analysis What is the price of sales ratio and what is the formula?

Answer 1

How much an investor is paying for a specific revenue stream Price / sales

Answer 2

A measure of relative valuation that can be used to compare companies with different growth rates Companies with low PEG ratio will have higher rates of return Stocks with PEG less than one are considered a possible value company PE / Growth

Answer 3

Interaction between supply and demand is the foundation for the value of any good or service Both rational and irrational factors control supply and demand. Market weighs each of these factors. Securities Tend to move in trends that endure for substantial periods of time Shifts or variations and supplying demand can always be detected in the movement of the market

Answer 4

Are either major, intermediate or short run Dow Jones industrials and transportation averages are expected to confirm each each other for a trend to be considered valid

Answer 5

If the stock price falls through a 200 day, moving average technicians would view this move as a signal to sell the security likewise a stock increasing above the 200 day moving average would indicate a buy signal

Answer 6

Trend will generally continue until a major event occurs to change the direction

Answer 7

Majority of investors are generally wrong regarding investment decisions Act opposite to the majority of investors Investors believe market is going to increase a contrarian will trade as if the market is going to decline

Answer 8

Odd lot theory Short interest theory Mutual fund cash position Investment advisory opinions Put call ratio

Answer 9

Smaller, investors, more likely to trade in odd lots than larger, institutional investors When odd lot traders buy, then you sell sell When odd lot analysis are Berish you become bullish

Answer 10

Increase sign of shortselling as an indicator that the market is near a trough and will soon turn around

Answer 11

Large cash balances would indicate that mutual funds believe that the market was Berish technicians Use this information to conclude that the market should be near its bottom. Extremely low cash balances indicate that mutual funds are fully invested technicians conclude that the market is near its peak and begin liquidating their positions in the market

Answer 12

Moore investment advisory opinions become bullish more a contrarian becomes

Answer 13

When puts exceed calls, it indicates bearish sentiment, a contrarian takes the opposite view and is bullish

Answer 14

Relative measure of the strength of the economy Bond holders shift their holdings to high-grade bonds when the economy is weak and shift to lower grade bonds when the economy is strong

Answer 15

Used to determine the strength of market advances and declines More than 80% of the market stocks are selling above their 200 day moving average market is considered overvalued, indicating a decline may be coming If less than 20% are above their 200 day moving average, the market is considered undervalued and gains may follow

Answer 16

Concentrates on the numerator of the P/E ratio, the P (Price) If the P/E ratio is below its natural level an efficient market will soon recognize this situation and drive the stock price upward

Answer 17

Focuses on the denominator of the P/E ratio (earnings) PE ratio will remain constant over the near term, stock price in an efficient market will increase as the forecasted earnings growth of the issuing company is realized Usually have a superior rate of growth , low dividend payouts above average price to earnings ratio, more volatile, higher beta Is a more aggressive approach

Answer 18

Written document with clients objectives and limitations on the investment manager Gives guidance to the investment manager and provides a means for evaluating investment performance

Answer 19

A method of financial analysis Attempts to forecast how investment returns on different asset classes, very overtime by using thousands of simulations to produce probability distributions for various outcomes

Answer 20

Computer generated distribution technique used to model uncertainty Used to determine the probability that an investor will actually realize and expected rate of return given and assumed risk Used to determine whether an investor will actually outlive the accumulated amount of retirement savings given, and assumed annual rate of withdrawal and associated, continuing rate of investment return

Answer 21

Used to evaluate the risk associated with a given investment and assesses the impact of different variables on an investments returns

Answer 22

Sharp ratio Treynor ratio Alpha

Answer 23

Relative measure of risk of a portfolio based on total risk (systematic, and unsystematic risk) Uses standard deviation as a measure of portfolio risk Can only be used to compare alternative investments

Answer 24

Relative measure of the risk adjusted rate of return of a given portfolio Uses beta, which is a measure of systematic or market risk Depends on beta the ratio yield valid result only if beta is meaningful, meaning R squared at least .70 Must be used to compare alternative investments

Answer 25

Is an absolute measure of performance Tells you how well the managed portfolio performed relative to an unmanaged portfolio of equal risk when comparing the portfolios actual return versus the portfolios expected return Uses beta, therefore, only produces meaning results when R squared is at least .70

Answer 26

Measures the portfolios, average rate of return in excess of a comparison benchmark portfolio divided by the standard deviation of the excess return

Answer 27

Relative measure of risk per unit of expected return Used to compare investments with varying rates of return and standard deviations Smaller than the better the risk adjusted result CV = standard deviation of assets / expected return of asset