A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of an investment and compares its risk-adjusted performance to a benchmark index. The excess return of the investment relative to the return of the benchmark index is the investment's alpha.
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market.
Price Earnings Ratio (P/E ratio):
A valuation ratio of a company's current share price compared to its per-share earnings.
Russell 2000® Index:
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
1. A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance.
2. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.
Sustainable Growth Rate:
The maximum growth rate that a firm can sustain without having to increase financial leverage. After the firm has passed this rate, it must borrow funds from another source to facilitate growth.
Morgan Stanley’s Capital International Europe, Australasia, and the Far East Index (MSCI EAFE):
An acronym referring to the geographical area that includes these three regions. These regions represent the most developed areas outside of North America.
MSCI's EAFE Index, which is comprised of 21 major indexes from Europe, Australasia and the Far East serves as the most frequently cited benchmark for the performance of a representative total international stock market.
Standard & Poor’s 500 Index (S&P 500):
An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.