Global Indexes and Investing Terminology

December 7, 2016

Definitions for the terminology we use on our site

For your reference, we've included definitions for the terminology we use on our site.

Glossary of financial terms

Alpha: Alpha refers to returns in excess of the benchmark.

Anchoring: Anchoring refers to the behavioral tendency to make estimates with a biased relationship toward an initial reference value.

Duration: Duration is a measure of a security’s price sensitivity to changes in interest rates. Specifically, duration measures the potential change in value of a bond that would result from a 1% change in interest rates. The shorter the duration of a bond, the less its price will potentially change as interest rates go up or down; conversely, the longer the duration of a bond, the more its price will potentially change.

Liquidity preference: Liquidity preference refers to the behavioral tendency to seek investments that can be bought or sold with relative ease and with minimal price impact.

Mean reversion: Mean reversion refers to the theory that prices and returns eventually move back towards their historical average.

Momentum: Momentum stocks are those whose prices are expected to keep moving in the same direction (either up or down) and are not likely to change direction in the short-term.

Price-to-earnings (P/E) ratio: The Price-to-Earnings Ratio is equal to market capitalization divided by after-tax earnings. The higher the P/E ratio, the more the market is willing to pay for each dollar of annual earnings.

Stability: Stability stocks exhibit less volatility than their peers.

Value (Risk Premium): Value stocks are those that are considered to be cheap and are trading for less than they are worth.

Index descriptions

The Bloomberg Barclays 1-10 Year U.S. TIPS Index measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of 1 to 10 years.

The Bloomberg Barclays U.S. Asset Backed Securities (ABS) Index measures the performance of ABS with the following collateral types: credit and charge card, auto and utility loans. All securities have an average life of at least one year.

The Bloomberg Barclays 3-10 Year Quality Intermediate Municipal Blend Index consists of tax-exempt general obligation, revenue and private-activity bonds and notes, which are issued by or on behalf of states, territories or possessions of the U.S. and the District of Columbia and their political subdivisions, agencies and instrumentalities with a remaining maturity of more than three years and less than ten years.

The Bloomberg Barclays 3-15 Year Quality Intermediate Municipal Blend Index consists of tax-exempt general obligation, revenue and private-activity bonds and notes, which are issued by or on behalf of states, territories or possessions of the U.S. and the District of Columbia and their political subdivisions, agencies and instrumentalities with a remaining maturity of more than three years and less than fifteen years. 

The Bloomberg Barclays Capital 1-Year Municipal Bond Index includes bonds with a minimum credit rating of BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have maturities of 1 to 2 years.

The Bloomberg Barclays Capital 1-5 Year U.S. TIPS Index measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of one to five years. 

The Bloomberg Barclays Capital 60/40 Barclays High-Yield Municipal & Barclays Municipal Bond Index has a 60% weighting in non-investment-grade municipal bonds and 40% weighting in investment-grade municipal bonds. 

The Bloomberg Barclays Capital CA Intermediate Municipal Index measures the performance of bonds issued by California municipalities.

The Bloomberg Barclays Capital GNMA Index represents securitized mortgage pools backed by the Government National Mortgage Association (GNMA). 

The Bloomberg Barclays Capital Global Aggregate Bond Index is an unmanaged market-capitalization-weighted benchmark and tracks the performance of investment-grade fixed-income securities denominated in 13 currencies. The index reflects reinvestment of all distributions and changes in market prices.

The Bloomberg Barclays Capital Global Aggregate X-US Hedged (USD) provides a broad-based measure of the global investment-grade fixed-rate debt markets outside of the U.S., consisting of the Bloomberg Barclays Pan-European Aggregate and Asian-Pacific Aggregate Indices, excluding the effects of foreign exchange movements vis-à-vis the U.S. dollar. 

The Bloomberg Barclays Global Treasury Bond Index is composed of those securities included in the Bloomberg Barclays Global Aggregate Bond Index that are Treasury securities.

The Bloomberg Barclays Global Aggregate Bond Index (formerly Lehman Brothers Global Aggregate Index), an unmanaged market capitalization-weighted benchmark, tracks the performance of investment-grade fixed-income securities denominated in 13 currencies. The Index reflects reinvestment of all distributions and changes in market prices.

The Bloomberg Barclays Global Aggregate ex-Treasury Index is an unmanaged market index representative of the total-return performance of ex-Treasury major world bond markets.

The Bloomberg Barclays Capital Long Government/Credit Index measures the investment return of all medium and larger public issues of U.S. Treasury, agency, investment-grade corporate, and investment-grade international dollar-denominated bonds with maturities longer than 10 years. The average maturity is approximately 20 years.

The Bloomberg Barclays Emerging Markets USD Sovereign Index tracks fixed- and floating-rate US dollar-denominated debt issued by sovereign EM issuers. Corporate issues are not eligible. 

The Bloomberg Barclays Capital MA Intermediate Muni Index measures the performance of bonds issued by Massachusetts municipalities. 

The Bloomberg Barclays Capital NY Intermediate Muni Index the performance of bonds issued by New York municipalities.

The Bloomberg Barclays Capital PA Intermediate Muni Index the performance of bonds issued by Pennsylvania municipalities.

The Bloomberg Barclays Capital Short U.S. Treasury 9-12 Month Index measures the performance of U.S. Treasury securities that have a remaining maturity between one and twelve months.

The Bloomberg Barclays Capital U.S. Aggregate Bond Index is a benchmark index composed of U.S. securities in Treasury, government-related, corporate and securitized sectors. It includes securities that are investment-grade quality or better, have at least one year to maturity and have an outstanding par value of at least $250 million.

The Bloomberg Barclays U.S. Corporate Investment Grade Index is a broad-based benchmark that measures the investment-grade, fixed-rate, taxable corporate bond market.

The Bloomberg Barclays U.S. Treasury Index is an unmanaged index composed of U.S. Treasurys.

The BofA Merrill Lynch U.S. High Yield Constrained Index contains all securities in The BofA Merrill Lynch U.S. High Yield Index but caps exposure to individual issuers at 2%.

The BofA Merrill Lynch U.S. High Yield Index tracks the performance of below-investment-grade, U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.

The Chicago Board Options Exchange Volatility Index (VIX) tracks the expected volatility in the S&P 500 Index over the next 30 days. A higher number indicates greater volatility.

The Dow Jones Industrial Average is a widely followed market indicator based on a price-weighted average of 30 blue-chip New York Stock Exchange stocks that are selected by editors of The Wall Street Journal.

The FTSE All-Share Index represents 98% to 99% of U.K. equity market capitalization. The Index aggregates the FTSE 100, FTSE 250 and FTSE Small Cap Indexes.

The iMoneyNet First Tier Institutional category includes only non-government institutional funds that also are not holding any second-tier securities. Portfolio holdings of first-tier funds include U.S. Treasury, U.S. other, repos, time deposits, domestic bank obligations, foreign bank obligations, first-tier commercial paper, floating-rate notes and asset-backed commercial paper. It is not possible to invest directly in an iMoneyNet category.

The iMoneyNet First Tier Retail category includes only non-government retail funds that also are not holding any second-tier securities. Portfolio holdings of first-tier funds include U.S. Treasury, U.S. other, repos, time deposits, domestic bank obligations, foreign bank obligations, first-tier commercial paper, floating-rate notes and asset-backed commercial paper. It is not possible to invest directly in an iMoneyNet category. 

The iMoneyNet Government & Agencies Institutional category includes the most broadly based of the government institutional funds. These funds may invest in U.S. Treasurys, U.S. agencies, repos or government-backed floating-rate notes.

The iMoneyNet Tax-Free National Retail category includes all retail national and state tax-free and municipal money funds. Portfolio holdings of tax-free funds include rated and unrated demand notes, rated and unrated general market notes, commercial paper, put bonds 6 months and less, put bonds over 6 months, alternative minimum tax paper and other tax-free holdings. The category consists of all funds in the National Tax-Free Retail and State-Specific Retail categories. 

The iMoneyNet Treasury & Repo Institutional includes only institutional government funds that hold U.S. Treasurys and repurchase agreements backed by the U.S. Treasury. 

The iMoneyNet Treasury & Repo Retail category includes only retail government funds that hold US Treasurys and repurchase agreements backed by the U.S. Treasury. 

The Dow Jones Wilshire Real Estate Securities Index (RESI) is used to measure the U.S. real estate market and includes both real estate investment trusts (REITs) and real estate operating companies (REOCs). It is weighted by float-adjusted market capitalization.

The J.P. Morgan Emerging Market Bond Index is a total-return unmanaged trade-weighted index for U.S.-dollar-denominated emerging-market bonds, including sovereign debt, quasi-sovereign debt, Brady bonds, loans and eurobonds.

The J.P. Morgan EMBI Global Diversified Index tracks the performance of external debt instruments (including U.S.-dollar-denominated and other external-currency-denominated Brady bonds, loans, eurobonds and local market instruments) in the emerging markets.

The J.P. Morgan GBI-EM Global Diversified Index tracks the performance of local-currency bonds issued by emerging-market governments. 

The MSCI All Country World ex U.S. Index includes both developed-markets and emerging-market countries, excluding the United States.

The MSCI All Country World Index is a market-capitalization-weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging-market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.

The MSCI EAFE Index is an unmanaged, market-capitalization-weighted equity index that represents the developed world outside North America.

The MSCI Emerging Markets Index is a free-float-adjusted market-capitalization-weighted index designed to measure the performance of global emerging market equities.

The MSCI Europe Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across 15 developed-market countries in Europe.

The MSCI Europe Growth Index captures large- and mid-cap securities exhibiting overall growth style characteristics across 15 developed-market countries in Europe. 

The MSCI World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of 23 developed market country indices.

The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) system.

The Nikkei 225 Index is a price-weighted average of 225 stocks selected from the Tokyo Stock Exchange that are highly liquid and representative of Japan’s industrial structure. 

The Russell 1000 Index includes 1000 of the largest U.S. equity securities based on market cap and current index membership; it is used to measure the activity of the U.S. large-cap equity market. 

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. 

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2000 Index includes 2000 small-cap U.S. equity names and is used to measure the activity of the U.S. small-cap equity market. 

The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 Index companies with higher price-to-value ratios and higher forecasted growth values. 

The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. 

The Russell 2500 Index measures the performance of the small- to mid-cap segment of the U.S. equity universe, commonly referred to as "smid" cap. The Russell 2500 is a subset of the Russell 3000 Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. 

The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. 

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.

The S&P 500 Index is a capitalization-weighted index made up of 500 widely held large-cap U.S.

The S&P 600 Index measures the small-cap segment of the U.S. equity market. The index is designed to be an investable portfolio of companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.

The Wilshire RESI Index measures the performance of publicly traded U.S. real estate securities. The Wilshire U.S. Real Estate Investment Trust (REIT) Index and the Wilshire US Real Estate Operating Companies (REOC) Index are subsets of the Wilshire US RESI.

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The Index is supplemented by the subindexes of the 33 industry sectors. The Index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.