Security Market Line (SML)
What is the Security Market Line (SML)? The security market line (SML) is a visual representation of the capital asset pricing model (CAPM). SML is a theoretical representation of the expected returns of assets based on systematic, non-diversifiable risk. Idiosyncratic risk is not included in the security market line. More broadly, the SML plots the...
Historical Returns
What are Historical Returns? The historical return of a financial asset, such as a bond, stock, security, index, or fund, is its past rate of return and performance. The historical data is commonly used in financial analysis to project future returns or determine what variables may impact future returns and the extent to which the...
Harvest Strategy
What is a Harvest Strategy? A harvest strategy is a calculated decision to minimize all types of spending on a specific product to maximize profitability, despite a potential decline in market share. A harvesting strategy can be developed for product or business lines and serves as an “exit” plan should a product become outdated. Harvesting...
Hit the Bid
What is Hit the Bid? The phrase “hit the bid” is a colloquial expression commonly used in investments to describe a scenario where a trader sells a financial instrument at the bid price quoted by a potential buyer (also a trader). When the scenario happens, it typically means accepting an offer that is considered fair...
Excess Returns
What are “Excess Returns”? The term “excess returns” is used to denote how a fund has performed compared to a benchmark. Excess return, which is also known as alpha, can provide an indication of whether a respective fund, stock, or security has overperformed or underperformed, and it is computed with the Capital Asset Pricing Model...
