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- Macaulay's Duration
- Effective maturity of bond, equal to
weighted average of the times until each payment, with
weights proportional to the present value of the payment.
- Maintenance, or Variation, Margin
- An established value
below which a trader's margin cannot fall. Reaching the
maintenance margin triggers a margin call.
- Describes securities purchased with money
borrowed from a broker. Current maximum margin is 50%.
- Market Capitalization Rate
- The market‐consensus estimate
of the appropriate discount rate for a firm's cash flows.
- Market Model
- Another version of the index model that
breaks down return uncertainty into systematic and
- Market Neutral
- A strategy designed to exploit relative
mispricing within a market, but which is hedged to avoid
taking a stance on the direction of the broad market.
- Market or Systematic Risk, Firm-specific Risk
- Market risk is
risk attributable to common macroeconomic factors.
Firm‐specific risk reflects risk peculiar to an individual firm
that is ill dependent of market risk.
- Market Order
- A buy or sell order to be executed
immediately at current market prices.
- Market Portfolio
- The portfolio for which each security is
held in proportion to its market value.
- Market Price of Risk
- A measure of the extra return, or risk
premium, that investors demand to bear risk. The reward torisk
ratio of the market portfolio.
- Market Risk
- See systematic risk.
- Market Segmentation or Preferred Habitat Theory
theory that long- and short-maturity bonds are traded in
essentially distinct or segmented markets and that prices in
one market do not affect those in the other.
- Market Timer
- An investor who speculates on broad market
moves rather than on specific securities.
- Market Timing
- Asset allocation in which the investment in
the market is increased if one forecasts that the market will
- Market Value of Assets
- The fair value of the plans assets
assuming that all holdings are liquidated on the measurement
- Market-book-value Ratio
- of price per share to book
value per share.
- Market-Value-Weighted Index
- An index of a group of
securities computed by calculating a weighted average
of the returns of each security in the index, with weights
proportional to outstanding market value.
- Marking to Market
- Describes the daily settlement of
obligations on futures positions.
- Mean-Variance Analysis
- Evaluation of risky prospects based
on the expected value and variance of possible outcomes.
- Mean-Variance Criterion
- The selection of portfolios based
on the means and variances of their returns. The choice of the
higher expected return portfolio for a given level of variance
or the lower variance portfolio for a given expected return.
- Mental Accounting
- Individuals mentally segregate assets
into independent accounts rather than viewing them as part
of a unified portfolio.
- Minimum-Variance Frontier
- Graph of the lowest possible
portfolio variance that is attainable for a given portfolio
- Minimum-Variance Portfolio
- The portfolio of risky assets
with lowest variance.
- Modern Portfolio Theory (MPT)
- Principles underlying
analysis and evaluation of rational portfolio choices based
on risk‐return trade‐offs and efficient diversification.
- Modified Duration
- Macaulay's duration divided by
1 + yield to maturity. Measures interest rate sensitivity of
- Momentum Effect
- The tendency of poorly performing
stocks and well‐performing stocks in one period to continue
that abnormal performance in following periods.
- Monetary Policy
- Actions taken by the Board of Governors
of the Federal Reserve System to influence the money
supply or interest rates.
- Money Market
- Includes short‐term, highly liquid, and
relatively low‐risk debt instruments.
- Mortality Tables
- Tables of probability that individuals of
various ages will die within a year.
- Mortgage-backed Security
- Ownership claim in a pool of
mortgages or an obligation that is secured by such a pool.
Also called a pass‐through, because payments are passed
along from the mortgage originator to the purchaser of the
- Multifactor CAPM
- Generalization of the basic CAPM that
accounts for extra‐market hedging demands.
- Multifactor Models
- Model of security returns positing that
returns respond to several systematic factors.
- Municipal Bonds
- Tax-exempt bonds issued by state and
local governments, generally to finance capital improvement
projects. General obligation bonds are backed by the general
taxing power of the issuer. Revenue bonds are backed by
the proceeds from the project or agency they are issued to
- Mutual Fund
- A firm pooling and managing funds of
- Mutual Fund Theorem
- A result associated with the CAPM,
asserting that investors will choose to invest their entire
risky portfolio in a market‐index mutual fund.