Mutual Funds Glossary.
1. Abnormal Return: The return earned on a financial asset in excess of that required to compensate for the risk of the asset.
2. Account Executive (alternatively, Registered Representative): A representative of a brokerage firm whose primary responsibility is servicing the accounts of individual investors.
3. Accounting Beta: A relative measure of the sensitivity of a firm's accounting earnings of the market portfolio.
4. Accounting Earnings (alternatively, Reported Earnings): A firm's revenue less its expenses. Equivalently, the change in the firm's book value of the equity plus dividends paid to shareholders.
5. Accrued Interest: Interest earned but not yet paid.
6. Active Efficient Set: The combination of securities that offer investors both maximum expected active return for varying levels of active risk and minimum active for varying level of expected active return.
7. Active Management: A form of investment management that involves buying and selling financial assets with the objective of earning positive abnormal returns.
8. Active Position: The difference between the percentage of an investor's portfolio invested in a particular financial asset and the percentage of a benchmark portfolio invested in the same asset.
9. Actual Margin: The equity in an investor's margin account expressed as a percentage of the account's total market value (for margin purchases) or total debt (for short sales).
10. Adjusted Beta: An estimate of a security's future beta, derived initially from historical data, but modified by the assumption that the security's "true" beta has a tendency over time to move towards the market average of 1.0
11. Adverse Selection: A problem in pricing insurance in that persons with above average risk are more likely to purchase insurance than are those with below average risk.
12. Aggressive Stocks: Stocks that have betas greater than 1.
13. Allocationally Efficient Market: A market for securities in which those firms with the most promising investment opportunities have access to the needed funds.
14. Alpha: The difference between the security's expected return and its benchmark return.
15. American Depository Receipts (ADRs): Financial assets issued by U.S. banks that represent indirect ownership of a certain number of shares of a specific foreign firm. These shares are held on deposit in a bank in the firm's home country.
16. American Option: An option that can be exercised at any time until and including its expiration date.
17. Annual Percentage Rate (APR): With respect to a loan, the APR is yield-to-maturity of the loan, computed using the most frequent time between payments as the compounding interval.
18. Anomaly: An empirical regularity that is not predicted by by any known asset pricing model.
19. Approved List: A list of securities than an investment organization deems worthy of accumulation in a given portfolio. In an organization that uses an approved list, typically, any security on the list may be purchased by the organization's portfolio managers without additional authorization.
20. Arbitrage: The simultaneous purchase and sale of the same, or essentially similar, security in two different markets for advantageously different prices.
21. Arbitrage Portfolio: A portfolio that requires no investment, has no sensitivity to any factor and has a positive expected return. More strictly, a portfolio that provides inflows in some circumstances and requires no outflows under any circumstances.
22. Arbitrage Pricing Theory: An equilibrium model of asset pricing that states that the expected return on a security is a linear function of the security's sensitivity to various common factors.
23. Arbitrageur: A person who engages in arbitrage.
24. Asked or Ask Price (alternatively, Offer Price): The person at which a market-maker is willing to sell a specified quantity of a particular security.
25. Asset Allocation: The process of determining the optimal division of an investor's portfolio among available asset classes.
26. Asset Class: A broadly defined generic group of financial assets, such as stocks or bonds.
27. Asymmetric Information: A situation in which one party has more information than another party.
28. At the Money: An option whose exercise price is roughly equal to the market price of its underlying assets.
29. Automated Bond System (ABS): A computer system established by the New York Stock Exchange to facilitate the trading of funds.
30. Average Tax Rate: The amount of taxes paid expressed as a percentage of the total income subject to tax.
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31. Bank Discount Basis: A method of calculating the interest rate on a pure discount fixed income security that uses the principal of the security as the security's cost.
32. Bankers' Acceptance: A type of money market instrument, It is promissory note issued by business debtor, with a stated maturity date, arising out of business transaction. A bank, by endorsing the note, assumes the obligation. If this obligation becomes actively traded, it is referred to as bankers' acceptance
33. Basis: The difference between the spot price of an asset and the future price of the same asset.
34. Basis Point: 1/100 or 1%.
35. Basis Risk: The risk to a futures investor that the basis will widen or narrow.
36. Bearer Bond: A bond that has attached coupons representing the rights to receive interest payments. The owner submits each coupon on its specified date to receive payment. Ownership is transferred simply by the seller's endorsing the bond over the buyer.
37. Benchmark Portfolio: A portfolio against which the investment performance of an investor can be compared for the purpose of determining investment skill. A benchmark portfolio represents a relevant and feasible alternative to the investor's actual portfolio and, in particular, is similar in terms of risk exposure.
38. Best-Effort Basis: A security underwriting in which the members of the investment banking group serve as agents instead of dealers, agreeing only to obtain for the issuer the best price that the market will a pay for the security.
39. Beta (alternatively, Beta Coefficient or Market Beta): A relative measure of the sensitivity of an asset's return to changes in the return on the market portfolio. Mathematically, the beta coefficient of the security's covariance with the market portfolio divided by the variance of the market portfolio.
40. Bid-Ask Spread: The difference between the price that the market-maker is willing to pay for a security and the price at which the market-maker is willing to sell the same security.
41. Bidder: In the context of corporate takeover, a firm making a tender offer to the target firm.
42. Bid Price: The price at which a market-maker is willing to purchase a specified quantity of a particular security.
43. Block: A large order (usually 10,000 shares or more) to buy or sell security.
44. Block House: A brokerage firm with the financial capacity and the trading expertise to deal in block trades.
45. Bond Rating: An indicator of the creditworthiness of specific bond issues. These ratings are often interpreted as an indication of the relative likelihood of default on the part of the respective bond issuer.
46. Bond Swapping: A form of active bond management that entails the replacement of bonds in a portfolio with other bonds so as to enhance the return of the portfolio.
47. Book Value of the Equity: The sum of the retained / earnings and other balance sheet entries classified under shareholders' equity, such as common stock and capital contributed in excess of par value.
48. Book Value per Share: A corporation's book value of the equity divided by the number of its common shares outstanding.
49. Bottom-Up Forecasting: A sequential approach to security analysis that entails first making forecasts for individual companies, then for industries, and finally for the economy. Each level of forecasts is conditional on the previous level of forecasts made.
50. Broker: An agent, or "middleman", who facilitates the buying and selling of securities for investors.
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51. Call Market: A security market in which trading is allowed only at a certain specified times. At those times, persons interested in trading a particular security are physically brought together and a market clearing price is established.
52. Call Money Rate: The interest rate paid by brokerage firms to banks on loans used to finance margin purchases by the brokerage firm's customers.
53. Call Option: A contract that gives the buyer the right to buy a specific number of shares of a company from the option writer at a specific purchase price during a specific time period.
54. Call Premium: The difference between the call price of the bond and the par value of the bond.
55. Call Price: The price that an issuer must pay bondholders when an issue is retired before its stated maturity date.
56. Call Provision: A provision in some bond indentures that permits an issuer to retire some or all of the bonds in a particular bond issue before the bonds' stated maturity date.
57. Capital Asset Pricing Model (CAPM): An equilibrium model of asset pricing that states that the expected return on a security is a positive linear function of the security's sensitivity to changes in the market portfolio's return.
58. Capital Gain (or Loss): The difference between the current market value of an asset and the original cost of the asset, with the cost adjusted for any improvement or depreciation in the asset.
59. Capitalization of Income Method of Valuation: An approach to valuing financial assets. It is based on the concept that the "true" or intrinsic value of a financial asset is equal to the discounted value of future cash flows generated by that asset.
60. Capital Market Line: The set of portfolios obtainable by combining the market portfolio with risk free borrowing or lending. Assuming homogeneous expectations and perfect markets, the capital market line represents the efficient set.
61. Capital Markets: Financial markets in which financial assets with a term to maturity of typically more than one year are traded.
62. Cash Account: An account maintained by an investor with a brokerage firm in which deposits (cash and proceeds from security sales) must fully cover withdrawals (cash and the cost of security purchases)
63. Cash Matching: A form of immunization that involves the purchase of bonds that generate the stream of cash inflows identical in amount and timing to a set of expected cash out-flows over a given period of time.
64. Certainty Equivalent Return: For a particularly risky investment, the return on a risk free investment that makes the investor indifferent between the risky and risk free investments.
65. Certificate of Deposit: A form of time deposit issued by banks and other financial institutions.
66. Characteristic Line: A simple linear regression model expressing the relationship between the excess return on a security and the excess return on the market portfolio.
67. Charter (alternatively, Certificate of Incorporation): A document issued by a state to a corporation that specifies the rights and obligations of the corporation's stockholders.
68. Chartist: A technical analyst who relies primarily on stock price and volume charts when evaluating securities.
69. Circuitbreakers: Established by the New York Stock Exchange, a set of upper and lower limits on the market price movements as measured by the Dow Jones Industrial Average. Depending on the magnitude of the price change, breaking through those limits, particularly on the downside, results initially in restrictions on program trading and ultimately in closing the exchange.
70. Clearinghouse: A cooperative venture among banks, brokerage firms and other financial intermediaries that maintain records of transactions made by member firms during a trading day. At the end of the trading day, the clearing house calculates net amounts of securities and cash to be delivered among the members, permitting each member to settle once with the clearing house.
71. Closed-End Investment Company: A managed investment company, with an unlimited life, that does not stand ready to purchase its own shares from its owners and rarely issues new shares beyond its initial offering.
72. Closing Price (alternatively, Close): The price at which the last trade of the day took place in a particular security.
73. Closing Purchase: The purchase of an option contract by an investor that is designed to offset, and thereby cancel, the previous sale of the same option contract by the investor.
74. Closing Sale: The sale of an option contract by an investor that is designed to offset, and thereby cancel, the previous purchase of the same option contract by the investor.
75. Coefficient of Determination (alternatively, R-Squared): In the context of the linear regression, the proportion of the variation in the dependent variable that is related to (that is, "is explained by") variation in the independent variables.
76. Coefficient of Nondetermination: In the context of linear regression, the proportion of the variation in the dependent variable that is not related to (that is, "is not explained by") variation in the independent variables. Equivalently, one minus the coefficient of determination.
77. Coincident Indicators: Economic variables that have been found to change at the same time that the economy is changing.
78. Collateral Trust Bond: A bond that is backed by other financial assets.
79. Commercial Paper: A type of money market instrument It represents unsecured promissory notes of large, financially sound corporations.
80. Commission: The fee an investor pays to a brokerage firm for services rendered in the trading of securities.
81. Commission Broker: A member of an organized security exchange who takes orders that the public has placed with brokerage firms and see that these orders are executed on the exchange.
82. Commodity Fund: An investment company that speculates in futures.
83. Commodity Futures Trading Commission (CFTC): A federal agency established by the Commodity Futures Trading Commission Act of 1974 that approves (or disapproves) the creation of new futures contracts and regulates the trading of existing futures contracts.
84. Common Factor: A factor that affects the return on virtually all securities to a certain extent.
85. Common Stock: Legal representation of an equity (or ownership) position in a corporation.
86. Comparative Performance Attribution: Comparing the performance of a portfolio with that of one or more other portfolios (or market indices) in order to determine the sources of their differences in their returns.
87. Competitive Bidding: With respect to selecting an underwriter, the process of an issuer soliciting bids on the underwriting and choosing the underwriter offering the best overall terms.
88. Complete Market: A market in which there are enough unique securities so that for any given contingency an investor can construct a portfolio that will produce a payoff if that contingency occurs.
89. Composite Stock Price Table: Price information provided on all stocks traded on the national exchanges, the regional stock exchanges, the Nasdaq system, and the Instinet system.
90. Compounding: The payment of interest on interest
91. Computer-Assisted Trading System (CATS): A computer system for trading stocks on the Toronto Stock Exchange that involves a computer file containing a publicly accessible limit order book.
92. Consolidated Quotations System: A system that lists current bid and asked prices of specialists on the national and regional stock exchanges, the Nasdaq system and the Instinet system.
93. Consolidated Tape: A system that reports trades that occur on the National Stock Exchanges, the regional stock exchanges, the Nasdaq system and the Instinet system.
94. Constant-Growth Model: A type of dividend discount model in which dividends are assumed to exhibit a constant growth rate.
95. Consumer Price Index: A cost-of-living index that is representative of the goods and purchased by U.S. consumers.
96. Contingent Deferred Sales Charge: A fee charged by a mutual fund to its shareholders if they sell their shares within a specified time after initially purchasing them.
97. Contingent Immunization: A form of bond management that entails both passive and active elements. Under contingent immunization, as long as favorable results are obtained, the bond portfolio is actively managed. However, if unfavorable results occur, then the portfolio is immediately immunized.
98. Continuous Market: A security market in which trades may occur at any time during business hours.
99. Contrarian: An investor who has opinions opposite those of most other investors, leading to action such as buying recent losers and selling recent winners.
100. Convertible Bond: A bond that may, at the holder's option, be exchanged for other securities, often common stock.
101. Convexity: The tendency for bond prices to change asymmetrically relative to yield changes. Typically, for the given yield change, a bond will rise in price more if the yield change is negative than it will fall in price if the yield change is positive.
102. Corner Portfolio: An efficient portfolio possessing the property that, if it is combined with any adjacent corner portfolio, the combination will produce another efficient portfolio.
103. Correlation Coefficient: A statistical measure similar to covariance, in that it measures the degree of mutual variation between two random variables. The correlation coefficient rescales covariance to facilitate comparison among pairs of random variables. The correlation coefficient is bounded by the values +1 and -1.
104. Cost of Carry: The differential between the futures and spot prices of a particular asset. It equals the interest forgone less the benefits plus the cost of ownership.
105. Cost-of-Living Index: A collection of goods and services, and their associated prices, designed to reflect changes over time in the cost of making normal consumption expenditures.
106. Counter party Risk: The risk posed by the possibility that the person or organization with which an investor has entered into a financial arrangement may fail to make required payments.
107. Coupon Payments: The periodic payment of interest on a bond.
108. Coupon Rate: The annual dollar amount of coupon payments made by a bond expressed as a percentage of the bond's par value.
109. Coupon Stripping: The process of separating and selling the individual cash flows of Treasury notes or bonds.
110. Covariance: A statistical measure of the relationship between two random variables. It measures the extent of mutual variation between two random variables.
111. Covered Call Writing: The process of writing a call option on an asset owned by the option writer.
112. Cross-Deductibility: The arrangement among federal and state tax authorities that permits state taxes to be deductible expenses for federal tax purposes and federal taxes to be deductible expenses for state tax purposes.
113. Crown Jewel Defense: A strategy used by corporations to ward off hostile takeovers. The strategy entails the target company's selling off its most attractive assets to make itself less attractive to the acquiring firm.
114. Cumulative Dividends: A common feature of preferred stock that requires that the issuing corporation pay all previously unpaid preferred stock dividends before any common stock dividends may be paid.
115. Cumulative Voting System: In the context of a corporation, a method of voting in which a stockholder is permitted to give any one candidate for the board of directors a maximum number of votes equal to the number of shares owned by that shareholder times the number of directors being elected.
116. Current Yield: The annual dollar amount of coupon payments made by a bond expressed as a percentage of the bond's current market price.
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117. Date of Record: The date, established quarterly by a corporation's board of directors, on which the stockholders of record are determined for the purpose of paying a cash or stock dividend.
118. Day Order: A trading order for which the broker will attempt to fill the order only during the day on which it was entered.
119. Day-of-the-Week-Effect: (alternatively, Weekend Effect): An empirical regularity whereby stocks returns appear to be lower on Mondays than on other days of the week.
120. Dealer (alternatively, Market-Maker): A person who facilitates the trading of financial assets by maintaining an inventory in particular securities. The dealer buys for and sells from this inventory, profiting from the difference in the buying and selling prices.
121. Dealer's Spread: The bid-ask spread quoted by a security leader.
122. Debenture: A bond that is not secured by specific property.
123. Debit Balance: The dollar amount borrowed from a broker as a result of the margin purchase.
124. Debt Refunding: The issuance of new debt for the purpose of paying off currently maturing debt.
125. Dedicated Portfolio: A portfolio of bonds that provides its owner with cash inflows that are matched against a specific stream of cash outflows.
126. Default Premium: The difference between the promised and expected yield-to-maturity on a bond arising from the possibility that the bond issuer might default on the bond.
127. Defensive Stocks: Stocks that have betas less than 1.
128. Delist: The process of removing a security's eligibility for trading on an organized security exchange.
129. Demand-to-Buy-Schedule: A description of the quantities of the security that an investor is prepared to purchase at alternative prices.
130. Demand Deposit: A checking account at a financial institution.
131. Depository Trust Company: A central computerized depository for securities registered in the names of member firms. Member's security certificates are immobilized and computerized records of ownership are maintained. This arrangement permits electronic transfer of the securities from one member to the another as trades are conducted between the members' clients.
132. Discount Broker: An organization that offers a limited range of brokerage services and charges fee substantially below those of brokerage firms that provide a full range of services.
133. Discount Factor: The present value of $1 to be received in a specified number of years.
134. Discounting: The process of calculating the present value of a given stream of cash flows.
135. Discount Rate: The interest rate used in calculating the present value of future cash flows. The discount rate reflects not only the time value of money but also the riskiness of the cash flows.
135. Discretionary Order: A trading order that permits the broker to set the specifications for the order.
136. Disintermediation: A pattern of funds flow whereby investors withdraw funds from financial intermediaries, such as bank and savings and loans, because market interest rates exceed the maximum interest rates that these organizations are permitted to pay. The investors reinvest their funds in financial assets that pay interest rates not subject to ceilings.
137. Distribution (12b-1) Fee: An annual fee charged by a mutual fund to its shareholders to pay for advertising, promoting and selling of the fund to new investors.
138. Diversification: The process of adding securities to a portfolio in order to reduce the portfolio's unique risk, and thereby, the portfolio's total risk.
139. Dividend Decision: The process of determining the amount of dividends that a corporation will pay its shareholders.
140. Dividend Discount Model: The term used for the capitalization of income method of valuation as applied to common stocks. All variants of dividend discount model assume that the intrinsic value of a share of common stock is equal to the discounted value of the dividend forecast to be paid on the stock.
141. Dividends: Cash payments made to stockholders by the corporation.
142. Dividend Yield: The current annualized dividend paid on a share of common stock, expressed a percentage of the current market price of the corporation's common stock.
143. Dollar-Weighted Return: A method of measuring the performance of a portfolio over a particular period of time. It is a discount rate that makes the present value of cash flows into and out of the portfolio, as well as the portfolio's ending value, equal to the portfolio's beginning value.
144. Domestic Return: The return on an investment in a foreign financial asset, excluding the impact of exchange rate changes.
145. Double Auction: Bidding among both buyers and sellers for a security that may occur when the specialist's bid-ask spread is large enough to permit sales at one or more prices within the spread.
146. Duration: A measure of the average maturity of the stream of the payments generated by a financial asset. Mathematically, duration is the weighted average of the lengths of time until the asset's remaining payments are made. The weights in this calculation are the proportion of the asset's total present value represented by the present value of the respective cash flows.
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147. Earnings per Share: A corporation's accounting earnings divided by the number of its common shares outstanding.
148. Earnings-Price Ratio: The reciprocal of the price-earnings ratio.
149. Econometric Model: A statistical model designed to explain and forecast certain economic phenomena.
150. Economic Earnings: The change in the economic value of the firm plus dividends paid to shareholders.
151. Economic Value of the Firm: The aggregate market value of all securities issued by the firm.
152. Effective Duration: A measure of a bond's duration that accounts for the ability of either the bond's issuer or the bondholders to cause the actual stream of cash payments to differ from that which would be received if the bond were paid off as promised over its entire life.
153. Efficient Diversification: The process of creating diversification in a portfolio by selecting securities in a manner that explicitly considers the standard deviation and correlation of the securities.
154. Efficient Market: A market for securities in which every security's price equals its investment value at all times, implying that a specified set of information if fully and immediately reflected in market prices.
155. Efficient Portfolio: A portfolio within the feasible set that offers investors both maximum expected return for varying levels of risk and minimum risk for varying levels of expected return.
156. Efficient Set (Frontier): The set of efficient portfolios.
157. Efficient Set Theorem: The proposition that investors will choose their portfolios only from the set of efficient portfolios.
158. Emerging Markets: Financial markets in countries that have a relatively low level of per capita gross domestic product, improving political and economic stability, a currency that is convertible into Western countries' currencies and securities available for investment by foreigners.
159. Empirical Regularities: Differences in return on securities that occur with regularity from period to period.
160. Endogenous Variable: In the context of an econometric model, an economic variable that represents the economic phenomena explained by the model.
161. Equal-Weighted Market Index: A market index in which all the component securities contribute equally to the value of the index, regardless of the various attributes of those securities.
162. Equilibrium Expected Return: The expected return on a security assuming that the security is correctly priced by the market. This "fair" return is determined by an appropriate asset pricing model.
163. Equipment Obligation (alternatively, Equipment Trust Certificate): A bond that is backed by specific pieces of equipment that, if necessary, can be readily sold and delivered to a new owner.
164. Equity Premium: The difference between the expected rate of return on common stock and the risk free return.
165. Equity Swap: A contract between two counter parties wherein one pays the other a fixed stream of cash flows and in return receives a varying stream whose cash flows are regularly reset on the basis of the performance of a given stock or a given stock market index.
166. Equivalent Yield: The annualized yield-to-maturity on a fixed-income security sold on a discount basis.
167. Eurobond: A bond that is offered outside of the country of the borrower and usually outside of the country in whose currency the security is denominated.
168. Eurodollar Certificate of Deposit: A certificate of deposit denominated by U.S. dollars and issued by banks domiciled outside of the United States.
169. European Option: An option that can be exercised only on its expiration date.
170. Excess Return: The difference between the return on a security and the return on the risk-free asset.
171. Exchange Distribution or Acquisition: A trade involving a large block of stock on an unorganized security exchange whereby a brokerage firms attempts to execute the order by finding enough offsetting orders from its customers.
172. Exchange Risk (alternatively, Currency Risk): The uncertainty in the return on a foreign financial asset owing to unpredictability regarding the rate at which the foreign currency can be exchanged into the investor's own currency.
173. Ex-distribution Date: The date on which ownership of stock is determined for purposes of paying stock dividends or issuing shares due to stock splits. Owners purchasing shares before the ex-distribution date receive the new shares in question. Owners purchasing shares on or after the ex-distribution date are not entitled to the new shares.
174. Ex-Dividend Date: The date on which ownership of stock is determined for purposes of paying cash dividends. Owners purchasing shares before the ex-distribution date receive the new shares in question. Owners purchasing shares on or after the ex-dividend date are not entitled to the dividend.
175. Exercise Price (alternatively, Striking Price): In the case of a call option, the price at which an option buyer may purchase the underlying asset from the option writer. In the case of a put option, the price at which an option buyer may sell the underlying asset to the option writer.
176. Exogenous Variable: In the context of an econometric model, an economic variable taken as given and used in the model to explain the model's endogenous variable.
177. Expectations Hypothesis: A hypothesis that the current futures price of an asset equal the expected spot price of the asset on the delivery date of the futures contracts.
178. Expected Rate of Inflation: That portion of inflation experienced over a given period of time that was anticipated by investors.
179. Expected Return: The return on a security (or portfolio) that an investor anticipates receiving over a holding period.
180. Expected Return Vector: A column of numbers that correspond to the expected returns for a set of securities.
181. Expected Yield-to-Maturity: The yield-to-maturity on a bond calculated as a weighted average of all possible yields that the bond might produce under different scenarios of default or late payments, where the weights are the probabilities of each scenario occurring.
182. Expiration Date: The date on which the right to buy or sell a security under an option contract ceases.
183. Ex Post: After the fact; historical.
184. Ex Post Alpha: A portfolio's alpha calculated on an ex post basis. Mathematically, over an evaluation interval, it is the difference between the average return on the portfolio and the average return on a benchmark portfolio.
185. Ex Post Selection Bias: In the context of constructing a security valuation model, the use of securities that have performed well and the avoidance of securities that have performed poorly, thus making the model appear more effective than it truly is.
186. Ex Rights Date: The date on which ownership of stock is determined for purposes of granting rights to purchase new stock in the right offering. Owners purchasing shares before the ex-rights date receive the rights in question. Owners purchasing shares on or after the ex-rights date are not entitled to the rights.
187. Externally Efficient Market: A market for securities in which information is quickly and widely disseminated, thereby allowing each security's price to adjust rapidly in an unbiased manner to new information so that the price reflects investment value.
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188. Factor (alternatively, Index): An aspect of the investment environment that influences the returns of financial assets. To the extent that a factor influences a significant number of financial assets , it is termed common or pervasive.
189. Factor Beta: A relative measure of the mutual variation of a particular common factor with the return on the market portfolio. Mathematically, a factor beta is the covariance of the factor with the market portfolio, divided by the variance of the market portfolio.
190. Factor Loading (alternatively, Attribute or Sensitivity): A measure of the responsiveness of a security's returns to a particular common factor.
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