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A

Aggressive trading, 160

Akaike information criterion (AIC),

27–29

Alza Pharmaceuticals, 198

American Home Products (AHP),

180

Analysis step, 24, 25

APT.SeeArbitrage pricing theory

Arbitrage pricing theory (APT),

39–42, 75

Arcsine law, 113

ARMA model, 124–125

ARMA process, 21–22

Arrow-Debreu theory, 172, 173, 177,

187

Asset returns, 3–5

Autocorrelation, 15

Autoregressive process (AR), 19–21

B

Band design, 119

BARRA model, 38

Baruch, Bernard, 141

Berkshire Hathaway, 182–183

Beta, 3–5, 37

Bias, 25

Bidder firm, 142

Bidder stock, 144

Bipartite graph, 157

Boesky, Ivan, 141

Bonds, issuing, 139

Bootstrap technique, 114, 116

Bounds, on position size, 163–165

Box, George, 14

Box-Jenkins approach, 15

Broker, 151

Brownian motion, 113, 163–164

Buffett, Warren, 182

Burmeister, Ibbotson, Roll, and Ross

(BIRR) model, 38

C

Cantor, 79

Capital Asset Pricing Model (CAPM),

3–5, 37

asset returns, 3–5

beta, 3–5

market portfolio, 3

security market line (SML), 3–4

Capital structure, 139

CAPM.SeeCapital Asset Pricing

Model

Cash amount, in a deal, 142, 144

Chinesing, 154

Chi-square merit function, 110–111

Close-close method, 111

Cohn, Harry, 141

Cointegration, 75–79

application of, 80

coefficient, 118

common trends model, 87–90

error correction, 76–77

Collars, 145

Common drift, 99

Common factor risk, 44–46

Common factor spread, 98–99

Common trends cointegration model,

87–90

Common trends model, 77

and APT, 90–93

Compaq Computers Company (CPQ),

154–155

Complexity theory, 79

Index

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