120 Nominal returns, 549-550, 553 Nonestimation universe, 357 Nonlinear portfolio, 31 Normal distribution, 32, 227-228, 239-241,243 Normalized returns, 271 North America Free Trade Agreement (NAFTA), 366 Notional leverage, 478 Null hypothesis, 53 Objectives, long-term, 590 Oil, 103 One-period returns, 313-315, 318-319 Opening price, 431 Operational risk, 27, 251 Optimal asset allocation, wealth creation, 571-578 Optimal portfolio: Capital Asset Pricing Model fCAPM), 40-43 characteristics of, generally, 12, 16, 23, 33, 39-41 construction, 297 covariance matrix estimation, 226 global equilibrium, 66, 70 weights, in strategic asset allocation, 106 Option pricing, 246, 439 Ordinary income, 548, 577 Ordinary least squares (OLS) regression, 357-358 Organizational culture, 259 Oscillation, implications of, 228-229, 238,555 Overconfidence, 418 Overlay, see Pure overlay Overreaction, long-term, 459^60 Over-the-counter (OTC) securities, 289 Partnerships, private equity, 519-521 Passive index portfolios, 25, 435 Passive management, 26, 202-203, 206-210,480,588 Passive portfolios, 581-582 Peer group, in performance measurement, 276-278 Pension funds: asset distribution, 112-113 funding probabilities, 128-130 liabilities, 52,111,125-126 overfunded, 127, 130 payout structure, 125-127 required returns, 126-128 risk plan for, 255 static analysis, 113-115 tax-exempt, 550 underfunded, 126,128,130 Percent returns, 313-315 Performance attribution, 260, 273, 299 Performance contribution, 299 Performance measurement, calculation of, 280-281. See also Performance measurement tools Performance measurement tools: alpha, 275-277 benchmarks, 275-276 green zone, 270-273 information ratio, 273, 275 meaningfulness of, 269-270 multiple, 268-269 peer group, 276-277 returns, attribution of, 273 Sharpe ratio, 273, 275 Planning, in risk management, 252 Plan Sponsor Network (PSN), 193 Plan sponsors: active management, 213 functions of, 211-212 risk monitoring, 221 Portable alpha, 480-481, 491 Portfolio analysis: alternative assets, 153-154 risk contributions, 156, 162 risk premium, 154-155 Portfolio diversification, 9, 11, 13 Portfolio management: characteristics of, generally, 28 wealth generation and, 590-592