12-month forward return: Returns for the 12-month period following an observed trailing 12-month dividend yield.
12b-1 fee: An annual marketing or distribution fee in a mutual fund; this fee is considered an operational expense and is included in a fund’s expense ratio.
AAA credit rating: This is the highest issuer credit rating assigned by Standard & Poor’s, signaling strong confidence that the issuer will be able to maintain its payment obligations.
Active manager: Portfolio managers who run funds that attempt to outperform the market by selecting those securities they believe to be the best.
Actively managed ETFs: Investment strategy where a manager selects securities in an attempt to outperform the performance benchmark.
Actively managed mutual funds: Investment strategies that are not designed to track the performance of an underlying index.
Adjusted gross income: Refers to a tax filer’s income level after accounting for allowable deductions.
ADRs: American Depository Receipts, shares of a firm incorporated outside the U.S. but issued by a global bank and traded in the U.S., denominated in U.S. dollars.
Annual screening date: The screening date refers to the date upon which characteristics of eligible constituent firms are measured, whereas the rebalance refers to when the results from the screening date are implemented by way of Index weights and constituents.
ASEAN countries: Association of Southeast Asian Nations. Indonesia, Malaysia, the Philippines, Singapore and Thailand comprise the original members.
Attribution analysis: Compares the performance of one index or investment to another, noting particularly the differences in weights or holdings. This analysis quantifies both the positive and the negative impacts to selecting or heavily weighting different stocks or sectors.
Authorized Participant (AP): An entity, usually an institutional investor, that submits orders to the ETF for the creation and redemption of ETF creation units.
Average daily volume: Average dollar amount traded over the course of a single trading day.
Average of All Years: Average of the 1-year forward performance for all 24 years for which data exists. This is an average of the individual calendar years taken separately for the MSCI Emerging Markets Index, not an average annual return.
Average Value: The average value of the “Defensives Relative to Cyclicals” values over this period.
Barclays Global Aggregate Index: A broad-based measure of the global investment grade fixed-rate debt markets. The index includes the U.S. aggregate, Pan-European Aggregate, and the Asian-Pacific Aggregate Index.
Barclays Global Credit Index: Index which contains investment grade and high yield credit securities from the Barclays Multiverse Index.
Barclays HY 2% Constrained Index: An issuer-constrained version of the U.S. Corporate High-Yield Index that measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds.
Barclays Multiverse Index: a broad-based measure of the international fixed-income bond market. The index represents the union of the Global Aggregate Index and the Global High Yield Index.
Barclays U.S. Aggregate Bond Index: Represents the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, as well as mortgage and asset backed securities.
Barclays U.S. IG Corporate Index: A broad-based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market.
Basis point: 1/100th of 1 percent.
Beta: Measure of the volatility of an index or investment relative to a benchmark. A reading of 1.00 indicates that the investment has moved in lockstep with the benchmark; a reading of -1.00 indicates that the investment has moved in the exact opposite direction of the benchmark.
Better Alternative Trading System (BATS): An alternative trading platform.
Bid/Ask Spread: This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it.
Bids: What investors are willing to pay.
Bloomberg: A computer system that allows investors to access the Bloomberg data service, which provides real-time financial data, news feeds and messages and also facilitates the placement of trades.
Book value per share: Total book value divided by the number of shares outstanding. Measured as a percentage change as of the annual Index screening date compared to the prior 12 months. Higher values indicate greater growth orientation.
Bottom-up: An investment approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual securities.
BRIC: An acronym for Brazil, Russia, India and China.
BSE Sensex 30 Index: A market capitalization-weighted index designed to measure the performance of 30 large, established firms listed on the Bombay Stock Exchange that represent the industries of India’s economy.
Bundled fee: A marketing strategy that joins products or services together in order to sell them as a single combined unit.
Capital gains: Positive difference between the sale price of an asset and the original purchase price.
Carry: The amount of return that accrues from investing in fixed income or currency forward contracts.
Consensus estimates: Refers to the estimates of a broadly representative group of different economists, part of whose expertise involves forecasting potential rates of GDP growth.
Corporate debt: Bonds a company issues in order to raise money.
Correlation: Statistical measure of how two sets of returns move in relation to each other. Correlation coefficients range from -1 to 1. A correlation of 1 means the two subjects of analysis move in lockstep with each other. A correlation of -1 means the two subjects of analysis have moved in exactly the opposite direction.
Creation Unit (CU): A specified number of shares issued by an exchange-traded fund (ETF) in large blocks, generally between 25,000 and 200,000 shares. The authorized participants that buy creation units either keep the ETF shares that make up the creation unit or sell all or part of them on a stock exchange.
Credit quality: A measure of a borrowers potential risk of default.
Credit ratings: Apply to the underlying holdings of the Fund, and not to the Fund itself. S&P and Moody’s study the financial condition of an entity to ascertain its creditworthiness. The credit ratings reflect the rating agency’s opinion of the holdings financial condition and histories.
Credit risk: The risk that a borrower will not meet their contractual obligations in conjunction with an investment.
Credit spread: The portion of a bond’s yield that compensates investors for taking credit risk.
Currency: Currency in which the underlying index returns are calculated. Euros: The returns are calculated, and there is no currency conversion; resulting statistics result purely from the returns of the equities. U.S. dollars: The returns are calculated and then converted into U.S. dollars; resulting statistics are the result of a combination of the euro’s performance against the U.S. dollar and the returns of the underlying equities.
Currency hedging: Strategies designed to mitigate the impact of currency performance on investment returns.
Current account deficit: Situation where a country has a greater level of imports than exports.
Curve: Refers to the yield curve. Positioning on the yield curve is important to investors, especially during non-parallel shifts.
Cyclical stocks: Refers to stocks in the Energy, Materials, Consumer Discretionary and Industrials sectors. The initial universe is that of the MSCI Emerging Markets Index.
Defensive stocks: Refers to stocks in the Consumer Staples, Health Care, Utilities and Telecommunication Services sectors. The initial universe is that of the MSCI Emerging Markets Index.
Defensives Relative to Cyclicals: The P/E ratio of defensive stocks divided by the P/E ratio of cyclical stocks. Higher values indicate that defensive stocks are rising more in price relative to their earnings per share than are cyclical stocks.
Deflation: The opposite of inflation, characterized by falling price levels.
Dividend: A portion of corporate profits paid out to shareholders.
Dividend growth: The growth in trailing 12-month dividends for the specified universe.
Dividend stream: For each constituent in the WisdomTree Dividend Index, the dividend stream refers to the regular dividends per share indicated to be paid in the coming year multiplied by the number of shares outstanding. Then the dividend stream of each firm is added up for the total dividend stream for the Index.
Dividend yield: a financial ratio that shows how much a company pays out in dividends each year relative to its share price.
Dividend-focused ETFs: ETFs that focus particularly on dividends when screening potential constituents for inclusion.
Dividend-focused indexes: Indexes that focus particularly on dividends when screening potential constituents for inclusion.
Dodd-Frank Act: Legislation passed in response to the 2008–09 financial crisis, meant to focus on what were viewed as potential shortcomings in the regulatory framework that contributed to this crisis.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
Dow Jones U.S. Select Dividend Index: The index is a modified market capitalization approach and weights by dividend yield. Stocks are selected for fundamental strength relative to their peers, subject to various screens such as dividend quality and liquidity.
Downgrade of U.S. government debt: Refers to a ratings agency, such as Moody’s or Standard & Poor’s, lowering their rating of U.S. government debt.
Downside protection: A broad investment conception referring in this case to the potential for the mitigation of risk due to the payment of dividends
Duration: A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.
Earnings growth estimates: Bloomberg analysts’ long-term earnings growth expectations, which encompass the estimated growth in operating earnings per share over the company’s next full business cycle, typically three to five years.
Earnings per share: Total earnings divided by the number of shares outstanding. Measured as a percentage change as of the annual Index screening date compared to the prior 12 months. Higher values indicate greater growth orientation.
Earnings Retention: Proportion of a firm’s earnings that are is not paid out to shareholders in the form of a dividend but rather reinvested back into the business. Higher numbers indicate a greater percentage of earnings are being reinvested.
Electronic Broking Services (EBS): A wholesale electronic trading platform used to trade foreign exchange (FX) with market making banks.
EM local currency debt: Debt denominated in the local currencies of emerging market governments.
EM USD Sovereigns: Debt denominated in U.S. dollars issued by emerging market governments.
Embedded Income Yield: Embedded Income Yield represents the annualized rate of return generated by a Fund’s investments in both fixed income securities and derivatives exclusive of interest rate changes and movement in foreign exchange spot rates. The calculation is intended to capture the Fund’s potential to earn income return over the next year given current holdings and market conditions. The Embedded Income Yield will differ from the portfolio’s Yield to Maturity, due to the incorporation of derivatives in the Embedded Income Yield. Embedded Income Yield and Portfolio Yield to Maturity may differ from a Fund’s actual distribution and SEC yield and do not reflect Fund expenses. Credit ratings apply to the underlying holdings of the Fund, and not to the Fund itself. S&P and Moody’s study the financial condition of an entity to ascertain its creditworthiness. The credit ratings reflect the rating agency’s opinion of the holdings financial condition and histories. The ratings shown are all considered investment grade and are listed by highest to lowest in percentage of what the Fund holds.
“Entitlement spending” refers to federal spending based on eligibility thresholds established by income, age or disability. Social Security, Medicare and Medicaid are the three largest entitlement programs and account for approximately $1.5 trillion in federal spending in 2012 (source: Congressional Budget Office).
European currency risks: The assumption of European currency risk means that investment returns will be impacted not only by the underlying stocks but also the performance of the euro relative to the U.S. dollar. If the euro declines versus the U.S. dollar, there will be a negative impact on returns; if the euro appreciates there will be a positive impact.
Excess reserves: Refers to money that banks have but do not loan out. In essence, the Fed has been purchasing assets, and this money has entered the money supply, but the vast majority of it has ended up sitting as reserves on bank balance sheets. To really stimulate economic growth potential, it would have to be loaned out, and without these loans occurring in large quantity, the U.S. is at a lower risk of inflationary pressure.
Exchange-traded notes: Different from exchange-traded funds in that they are a direct obligation of a financial entity—typically a bank—where the contract specifies that the bank will pay the holder of the note according to the returns of an underlying index minus applicable fees. Exchange-traded funds hold the underlying assets of the index and their returns represent the returns of the assets held.
Execution process: The process of getting in and out of an investment.
Fair value: Also known as “eNAV.” It is essentially an indicative value (IV) that is made in real time by calculating the basket value on every underlying tick and by adjustments that account for updated market news
Fed Interest Rates: Refers to the Federal Funds Rate, which is the rate that banks that are members of the Federal Reserve system charge on overnight loans to one another. The Federal Open Market Committee sets this rate. Also referred to as the “policy rate” of the U.S. Federal Reserve.
Fed tightening: Refers to the Federal Reserve enacting monetary policies that have the overall impact of reducing the availability of credit, which is widely thought to have the potential to slow economic growth.
The Federal Reserve’s balance sheet: Refers to all the assets it has purchased and is now holding. When the Fed purchases assets, money that had previously not been in circulation enters circulation. This expands the overall money supply and is meant to stimulate economic growth.
Fiscal cliff: is a term used to describe the fiscal situation the federal government faces when a series of large tax increases and spending cuts are due to take effect at the end of 2012 and in early 2013.
Fiscal deficit: Situation where government spending exceeds government revenue.
Fixed income: An investment security that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity.
Flows: Monetary investment from foreign investors.
Foreign Exchange (FOREX, FX): The exchange of one currency for another, or the conversion of one currency into another currency.
Forward contracts: An agreement to buy or sell a specific currency at a future date at an agreed upon rate.
Forward currency contracts: A forward contract in the forex market that locks in the price at which an entity can buy or sell a currency on a future date.
Frankfurt’s DAX: A stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The prices used to calculate the DAX Index come through Xetra, an electronic trading system. A free-float methodology is used to calculate the index weightings along with a measure of average trading volume.
FTSE China 25 Index: Represents the 25 largest and most liquid Chinese stocks (H Shares and Red Chips) listed and trading on the Hong Kong Stock Exchange.
FTSE Emerging Markets Index: A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
FTSE MIB Index: The FTSE MIB Index is the primary benchmark index for the Italian equity market. Capturing approximately 80% of the domestic market capitalization, the FTSE MIB Index measures the performance of the 40 most liquid and capitalized Italian shares and seeks to replicate the broad sector weights of the Italian stock market.
FTSEurofirst 300 Index: The FTSEurofirst 300 Index is part of the FTSEurofirst Index Series and the FTSEurofirst 300 Indices, which are tradable indices measuring the performance of European portfolios. It is a capitalization-weighted price index which uses free-float. It measures the performance of Europe’s largest 300 companies by market capitalization
Fund Distribution Yield: The fund distribution yield is calculated by annualizing the most recent fund distribution and dividing by the fund’s current NAV. The yield represents a single distribution from the fund and does not represent the total returns of the fund.
Fundamental value: The value of a firm that is related to a company’s actual operations and production as opposed to changes in share price.
Fundamental weighting: A type of equity index in which components are chosen based on fundamental criteria as opposed to market capitalization. Fundamentally weighted indexes may be based on fundamental metrics such as revenue, dividend rates, earnings or book value.
G10/Group of Ten: A group of industrialized nations that meet on an annual basis to plan, debate, and cooperate on international financial matters. Member countries include: Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, United Kingdom, and United States.
G3: The world’s three leading economic blocs, currently comprising the United States, Europe and Japan.
Global bank: Large financial institution capable of making bulk-sized international transactions.
Global carry trades: Occur when investors borrow money in a low-interest-rate country at low cost and use it to invest in a higher-interest-rate country. The potential profit that exists relates to the difference in interest rates between the two countries, minus applicable trading costs.
Gross domestic product (GDP): The sum total of all goods and services produced across an economy.
Growth: Characterized by higher price levels relative to fundamentals, such as dividends or earnings. Price levels are higher because investors are willing to pay more due to their expectations of future improvements in these fundamentals.
Growth stocks: Stocks whose share prices are higher relative to their earnings per share or dividends per share. Investors are willing to pay more because of their earnings or dividend growth expectations going forward.
Growth style: Style of investing emphasizing stocks with share prices typically higher in relation to financial metrics, such as dividends or earnings.
Haircut: Refers to scenario where prices of bonds carried on bank balance sheets are given a lower current price, commensurate with how the bonds would trade at their market price.
Hedge: Apply strategies meant to mitigate the impact of currency movements on equity returns.
Hedge currency exposure: Engage in transactions that mitigate the impact of currency fluctuations on the total returns of foreign investments. Hedging can help returns when a foreign currency depreciates against the U.S. dollar, but it can hurt when the foreign currency appreciates against the U.S. dollar.
High Dividend Yield Years: Average of the 1-year forward performance, taken for each individual 1-year period, following year-end trailing 12-month dividend yields above the median value for all 24 values for the MSCI Emerging Markets Index. This is not an average annual return.
High Yield: Sometimes referred to as “junk bonds,” these securities have a higher risk of default than investment-grade securities.
Higher-income individuals: Single tax filers reporting $400,000 or more in income after any applicable deductions, and household tax filers reporting $450,000 or more in income after any applicable deductions.
Higher-income investors: Married tax filers with adjusted gross income greater than $250,000, and single filers with adjusted gross income greater than $200,000.
HSBC Asian Local Bond Index (ALBI): The HSBC Asian Local Bond Index tracks the total return performance of liquid bonds denominated in the local currencies in China, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. Country weightings are driven by market capitalization, liquidity, accessibility, and market development, while security weightings within the countries are based on market capitalization.
Hyperinflation: Extremely rapid, uncontrolled rise in price levels during a short period of time.
Hypothetical capacity: Refers to a hypothetical capacity level for assets tracking the performance of the WisdomTree Emerging Markets Equity Income Index, which denotes the level of assets where the Index would prescribe taking its first 10% position in an underlying constituent.
Illiquidity: The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset. The lack of ready buyers also leads to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity.
Implied interest rate: The annualized interest rate implied by forward currency contracts relative to spot rates.
Index-based mutual funds: Investment strategies designed to track the performance of an underlying index.
Indicated dividend stream: Each financial firm within the WisdomTree Dividend Index as of 11/30/2009 takes its most recently declared regular dividend per share multiplied by its number of shares outstanding—these figures are then added together.
Indicated Dividend Yield: Indicated dividends per share are annualized and then divided by the current share price. High values indicate low prices relative to indicate low prices relative to indicated dividends.
Indicative Value (IV): The indicative value (IV) is the value that ETF issuers provide to offer a more real-time indication of the value of each ETF portfolio. It is also sometimes known as the indicative optimized portfolio value (IOPV) or intraday indicative value (IIV)
Interest rate risk: The risk that an investment’s value will decline due to an increase in interest rates.
Intrinsic value: Value of a firm based on its operations, business practices and profitability, which may or may not be closely related to the value of that same firm based on its equity share price.
Investment-grade: A bond that is deemed by a rating agency to have a low risk of default.
Investment-grade % of universe: The percentage of the aforementioned market size that is rated an investment-grade credit by either Standard & Poor’s, Moody’s or Fitch. Yield to maturity: The rate of return an investor receives for holding a bond to maturity. Duration: A measure (in years) of a bond’s sensitivity to interest rate movements.
Japan’s Nikkei: Short for Japan’s Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the U.S.
Japanese Government Bond (JGB): A bond issued by the government of Japan. The government pays interest on the bond until the maturity date. At the maturity date, the full price of the bond is returned to the bondholder. Japanese government bonds play a key role in the financial securities market in Japan.
JP Morgan Corporate Emerging Markets Bond Index Broad (CEMBI Broad): The JPMorgan Corporate Emerging Markets Bond Index Broad (CEMBI Broad) is a market capitalization weighted index consisting of US dollar-denominated Emerging Market corporate bonds. The index serves as a global corporate benchmark representing Asia, Latin America, Europe and Middle East / Africa. US dollar-denominated corporate issues from index-eligible countries are narrowed further by only including issues with more than $300m current face outstanding and at least five years to maturity (at the time of inclusion into the index).
JP Morgan Emerging Markets Bond Index Global (EMBI Global): The JPMorgan Emerging Markets Bond Index Global (EMBI Global) tracks total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities including Brady bonds, loans, Eurobonds.
JP Morgan GBI-EM Global Diversified Hungary Index: The JP Morgan GBI EM Global Diversified Index and its underlying country and regional subindices tracks the performance of local currency debt issued by emerging market governments, whose debt is accessible by most of the international investor base. The Hungary subindex represents government debt issued in Hungarian forint.
JP Morgan Government Bond Index – Emerging Markets (GBI-EM) Global Diversified Index: The JP Morgan GBI EM Global Diversified Index tracks the performance of local currency debt issued by emerging market governments, whose debt is accessible by most of the international investor base. The index incorporates a constrained market-capitalization methodology in which individual issuer exposures are capped at 10%, (with the excess distributed to smaller issuers) for greater diversification among issuing governments.
Last price: The last price the security traded at on the stock exchange.
Lead Market Maker (LMM): A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security.
Leverage: Total assets divided by equity. Higher numbers indicate greater borrowing to finance asset purchases; leverage can tend to make positive performance more positive and negative performance more negative.
Liquid market: A market in which it is easy to execute a trade with minimal price impact.
Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.
Liquidity providers: Traders that facilitate the trading of ETF shares by conducting the transference of liquidity between the underlying basket shares and the ETF.
Local currency sovereign bond yield: The rate of return derived from a local currency-denominated government bond, assuming that the security is held to maturity.
Local currency sovereigns: debt denominated in local currencies issued by an emerging market government.
Long-Term Earnings Estimates: Estimated compounded annual growth rate of the operating earnings per share (EPS) over the company’s next full business cycle (typically 3-5 years).
Long-Term Earnings Growth Expectations: Compilation of analyst estimates of the growth in operating earnings expected to occur over the next full business cycle, typically 3 to 5 years, sourced from Bloomberg.
Low Dividend Yield Years: Average of the 1-year forward performance, taken for each individual 1-year period, following year-end trailing 12-month dividend yields below the median value for all 24 values for the MSCI Emerging Markets Index. This is not an average annual return.
M2 money supply: Contains all funds deposited in checking accounts as well as funds deposited in savings accounts and certificates of deposit. There are various ways to measure the money supply of an economy. This one is meant to broadly account for the majority of savings and checking accounts held by individuals and businesses across the economic landscape.
Market: A bid and an offer on a particular ETF.
Market capitalization: The total market value of a company’s debt or securities.
Market capitalization-weighting: Market cap = share prices x number of shares outstanding. Firms with the highest values receive the highest weights in approaches designed to weight firms by market cap.
Master limited partnership (MLP): Investment structure where holdings typically must derive most of their cash flows from real estate, natural resources or commodities, combining the tax benefits of a partnership—taxes occur when holders receive distributions—with the liquidity of a publicly traded company.
Median: The median is the value within a dataset at which 50% of all observations occur above and 50% occur below.
Median trailing 12-month dividend yield: Dividends over the prior 12-months are added up and divided by the current share price. Higher values indicate more dividends are being generated per unit of share price.
Medium Dividend Yield Years: Average of the 1-year forward performance, taken for each individual 1-year period, following year-end trailing 12-month dividend yields not among the 8 highest or 8 lowest of all 24 values. This is not an average annual return.
Mergent Dividend Achievers Select Index: Designed to track the performance of dividend-paying companies in the U.S. that have increased their annual dividend payments for the last 10 or more consecutive years.
Modified equal-weighted indexes: Equal-weighted indexes place an equal weight on each constituent, the major result being that index weight has no connection to company size. Modified equal-weighted methodologies similarly disconnect index weight from company size but do not prescribe exactly equal weights for each constituent.
Monetary Base: For a particular economy, the sum total of all cash and bank deposits in circulation. Increasing this number is one way to stimulate economic growth.
Monetary easing policies: Actions undertaken by a central bank with the ultimate desired effect of lowering interest rates and stimulating the economy.
Morningstar Dividend Yield Focus Index: This focused benchmark tracks income-producing securities issued by financially healthy companies with sustainable profits. The index includes the top 75 income-producing stocks that meet certain eligibility criteria. The index aims to maximize yield by using a fundamental, dividend-based weighting system.
MSCI AC Asia Pacific ex Japan Index: The MSCI AC Asia Pacific ex Japan Index captures large and mid cap representation across 4 of 5 Developed Markets countries (excluding Japan) and 8 Emerging Markets countries in the Asia Pacific region. With 683 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Developed Markets countries in the index include: Australia, Hong Kong, New Zealand and Singapore. Emerging Markets countries include: China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.
MSCI AC World ex-US Index: Measures the performance of companies incorporated in both emerging markets and developed markets, excluding the United States. Index weighting is by market cap.
MSCI AC World ex-US Sector Sub Indexes: Composed of companies within the broad MSCI AC World ex-US Index classified into indexes encompassing each of the following 10 GICS industry sectors: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Telecommunication Services and Utilities.
MSCI ACWI ex-U.S. Index: A free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets excluding companies based in the United States.
MSCI ACWI Index: A free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets.
MSCI Australia Index: Market capitalization-weighted index designed to measure the performance of Australian equities.
MSCI Brazil Index: Index weighted by float-adjusted market capitalization designed to measure the performance of the Brazilian equity market.
MSCI China Index: A free float-adjusted, market capitalization-weighted equity index designed to measure the performance of the Chinese equity market.
MSCI EAFE Growth Index: Market capitalization-weighted subset of stocks within the MSCI EAFE Index that have higher share prices relative to their earnings or dividends per share.
MSCI EAFE Index: is a market cap-weighted index composed of companies representative of the developed market structure of developed countries in Europe, Australasia and Japan.
MSCI EAFE Mid Cap Index: A free float-adjusted market capitalization equity index that captures mid-cap representation across developed market countries around the world, excluding the U.S. and Canada.
MSCI EAFE Small Cap Index: A free float-adjusted market capitalization equity index that captures small-cap representation across developed market countries around the world, excluding the U.S. and Canada.
MSCI EAFE Value Index: Market capitalization-weighted subset of stocks within the MSCI EAFE Index that have lower share prices relative to their earnings or dividends per share.
MSCI Emerging Markets Index: Broad market cap weighted Index showing performance of equities across 21 emerging market countries.
MSCI EMU Index: A free float-adjusted market capitalization-weighted index designed to measure the performance of the markets in the European Monetary Union.
MSCI EMU Local Currency Index: The MSCI EMU Local Currency Index captures large- and mid-cap representation across the 11 developed market countries in the EMU and provides local currency returns, which are not translated back to U.S. dollars.
MSCI Europe Index: A free float-adjusted market capitalization-weighted index designed to measure the performance of developed equity markets in Europe.
MSCI Europe Small Cap Index: A free float-adjusted market capitalization-weighted index designed to measure the performance of developed equity markets in Europe, specifically focusing on the small-cap segment of these equity markets.
MSCI India Index: A market capitalization-weighted index designed to measure the performance of the Indian equity market.
MSCI Russia Index: Index weighted by float-adjusted market capitalization designed to measure the performance of the Russian equity market.
MSCI South Korea Index: A free float-adjusted market capitalization-weighted equity index designed to measure the performance of the South Korean equity market.
MSCI World Equity Index: 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.
Multiple expansion: Term for a rising P/E ratio, meaning that share prices are rising faster than earnings are growing.
NASDAQ US Dividend Achievers Select Index: Designed to track the performance of dividend-paying companies in the U.S. that have increased their annual dividend payments for the last 10 or more consecutive years.
Net asset value (NAV): The calculated assets minus liabilities divided by shares outstanding. NAV is the straightforward account of the actual assets in the fund
Net profit: A measure of profitability after accounting for all costs.
Nikkei 225 Stock Average Index: A price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange.
Non-deliverable forward currency contract: An agreement to buy or sell a specific currency at a future date at an agreed-upon rate that is settled in U.S. dollars.
Non-performing loan: A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue but there are other good reasons to doubt that payments will be made in full.
NSE S&P CNX Nifty Index: A market capitalization-weighted index designed to measure the performance of 50 large companies listed on the National Stock Exchange of India.
Number of constituents optimized: These numbers refer to hypothetical optimizations in which every security in the Index is held (“0”) to omitting the 20 most constraining positions (“20”).
Weight of optimized constituents: The weight of the constituents excluded as a result of any optimization. A lower number indicates that the assets tracking the Index are closer to holding every security within the Index in its prescribed weight.
Offer: The price at which investors are willing to sell.
Operating earnings: Earnings from continued, regular business operations that do not account for certain one-time charges that may be unique to a particular quarter or period and not repeatable.
Order flow: The collective orders to either buy or sell specific securities.
Ordinary income: Refers to wage and salary income from employment.
Ordinary income rates: Tax rates faced by American citizens on their salary and wage income.
Passive: Passive indexes take a rules-based approach with regular rebalancing schedules that are not changed due to market conditions.
Price discovery: A method of determining the price for a specific commodity or security through basic supply and demand factors related to the market.
Price-to-cash flow ratio: Share price divided by cash flow per share. Lower numbers indicate an ability to access greater amounts of cash flows per dollar invested.
Price-to-earnings (P/E) ratio: Share price divided by earnings per share. Lower numbers indicate an ability to access greater amounts of earnings per dollar invested.
Productivity growth: The efficiency with which resources are used to generate economic output. Increasing levels indicate an ability to produce more with less.
Purchasing power parity: Academic concept stating that exchange rates should adjust so that equivalent goods and services cost the same across countries, after accounting for exchange-rate differences.
Qualified dividends: Dividend paid by corporations meeting certain criteria defined by the Internal Revenue Service and therefore eligible in certain instances to be taxed at rates below a tax filer’s tax bracket on ordinary income.
Quantitative Easing (QE): A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity.
Real assets: Assets that have their own value independent of their price, typically used to mitigate the potential impact of inflation lessening the purchasing power of an investor’s home currency.
Real estate investment trust (REIT): Investment structure containing a basket of different exposures to real estate, be it directly in properties or in mortgages. Returns predominantly relate to changes in property values and income from rental payments.
Real interest rate: Interest rate accounting for the impact of inflation. From the nominal interest rate, which does not account for the impact of inflation, the rate of inflation is subtracted to get to the real interest rate.
Rebalance: An index is created by applying a certain set of selection and weighting rules at a certain frequency. WisdomTree rebalances, or re-applies its rules based selection and weighting process on an annual basis.
Reconciliation process: A process established by the Congressional Budget Act of 1974 by which Congress changes existing laws to conform tax and spending levels to the levels set in a budget resolution. Used in recent decades as a parliamentary tactic for resolving disputes in budget-related bills, the process limits debate and thereby bypasses Senate filibusters. This makes it possible for a Party in control of the Senate to pass controversial legislation with as little as 50 Senate votes, assuming the Vice president casts the tie-breaking vote. The Omnibus Budget Reconciliation Act of 1993, which raised top marginal tax rates to 39.6%, was passed using the reconciliation process.
Reflationary: Characterized by an environment of rising price levels.
Regular cash dividends: Dividends that companies indicate they will commit to paying on an ongoing basis at a set frequency.
Relative value: The relationship between a particular attribute, e.g., a dividend, and the firm’s share price compared to that of another firm.
Reserve currency: A foreign currency held by a central bank or monetary authority as a long-term store of value.
Reserve requirements: Mandated amounts of cash that banks must hold on hand to cover their liabilities.
Return on assets (ROA): Firm profits (after accounting for all expenses) divided by the firm’s total assets. Higher numbers indicate greater profits relative to the level of assets utilized to generate them.
Return on Equity (ROE): Measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
Revenue sharing: The practice of sharing operating profits with a company’s employees, or of sharing the revenues resulting between companies in an alliance.
Risk: Also standard deviation, which measures the spread of actual returns around an average return during a specific period. Higher risk indicates greater potential for returns to be farther away from this average.
Risk premium: Equity investments are not risk free, but it is thought that investors buy stocks because the returns they expect are high enough to allow them to take the risk.
Risk sentiment: The degree of comfort an investor has for tolerating market risk.
Risk-adjusted returns: Returns measured in relation to their own variability. High returns with a high level of risk indicate a lower probability that actual returns were close to average returns. High returns with a low level of risk would be more desirable, as they indicate a higher probability that actual returns were close to average returns.
Russell 1000 Index: A measure of the performance of the 1,000 largest companies by market capitalization in the Russell 3000 Index.
Russell 2000 Index: measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
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.
Russell 3000 Index: Measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
Russell Midcap Index: 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.
Russell MidCap Value Index: measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values.
S&P 500 Index: Market capitalization-weighted benchmark of 500 stocks selected by the Standard and Poor’s Index Committee designed to represent the performance of the leading industries in the United States economy.
S&P 500 Sector Sub-Indexes: Composed of companies within the broad S&P 500 Index classified into indexes encompassing each of the following 10 GICS Industry sectors: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Telecommunication Services and Utilities.
S&P High Yield Dividend Aristocrats Index: Designed to track the performance of dividend-paying companies in the U.S. that have increased their annual dividend payments for the last 20 or more consecutive years.
Sales per share: Total sales divided by the number of shares outstanding. Measured as a percentage change as of the annual Index screening date compared to the prior 12 months. Higher values indicate greater growth orientation.
SEC 30-Day Yield: The yield figure reflects the dividends and interest earned during the period, after deduction of the Fund’s expenses. This is also referred to as the “standardized yield.”
Semi-government: state and territory governments in Australia who help fund public infrastructure investments and manage regional balance sheets.
Shadow banking system: A collection of non-bank financial intermediaries that provide services similar to traditional commercial banks.
Share buybacks: Firms using cash to purchase their own outstanding shares; may positively impact the share price.
Share price: Measured as the cumulative change in share price for the 12 months leading up to the Index screening date. Higher values indicate greater growth orientation.
Size capitalization: A measure by which a company’s size is classified. Large caps are usually classified as companies that have a market cap over $10 billion. Mid caps range from $2 billion to $10 billion. Small caps are typically new or relatively young companies and have a market cap between $200 million to $2 billion.
Size on the screen: The amount of shares that are bid for and offered that can be seen by looking at the quote.
Slippage: The difference between the expected price of conducting a transaction compared to the actual execution price.
Sovereign: A national government.
Sovereign Debt: Bonds issued by a national government in a foreign currency, in order to finance the issuing country’s growth.
Special dividends: A non-recurring distribution of company assets, usually in the form of cash, to shareholders.
Spot currency: The foreign exchange rate of a currency available for immediate delivery.
Spot price: The current price at which a particular security can be bought or sold at a specified time and place.
Standard deviation: measure of how widely an investment or investment strategy’s returns move relative to its average returns for an observed period. A higher value implies more “risk”, in that there is more of a chance the actual return observed is farther away from the average return.
Stock buybacks: When a company uses cash to purchase shares of its own stock within the market, which is thought to be supportive for the share price.
Stock options: Conveys to an executive the right to buy a number of shares of his firm’s stock at a pre-specified price at some time in the future. Stock option holders are not eligible for any dividend distributions to shareholders.
STOXX Europe 600 Index: The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
Supranational: Organization (such as the World Bank or the International Monetary Fund) formed by two or more non-governmental organizations aimed at promoting economic development.
Tax deductible: When a particular expense can be subtracted from a firm’s income prior to the calculation of its tax liability.
Tax-insensitive investors: Those who utilize accounts that are not subject to year-by-year taxation. Examples include individual retirement accounts, pension funds, 401(k)’s, endowments and annuities.
Tax-preferred income: Refers to the fact that dividend tax rates tend to be lower than ordinary income tax rates.
Three major ratings agencies: Includes Standard & Poor’s, Moody’s, and Fitch.
TIPS: Treasury Inflation Protected Securities
Tokyo Stock Price Index (TOPIX): A free float-adjusted market capitalization-weighted index that is calculated based on all the domestic common stocks listed on the Tokyo Stock Exchange First Section.
Top-down: A method of analysis that involves looking at the “big picture” first and then analyzing the details of smaller components.
Total attribution: Quantitative comparison of the performance between one index or investment and another, based on the difference in total returns between the two. Attribution measures the contribution to relative performance of certain characteristics, be it differences in underlying stock holdings within sectors or weighting different sectors more or less heavily.
Tracking Error: A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark.
Trailing 12-month cash dividends: Firm’s cash dividends paid over the prior 12-month period
Trailing 12-Month Dividend Growth: Dividends paid over the prior 12-months as of a particular date are summed and compared to dividends paid over the prior 12-months as of a different date at some point occurring earlier. The percentage change measured between these two points is equivalent to the growth rate in trailing 12-month dividends.
Trailing 12-month dividend per share: A firm’s dividends paid over the prior 12-month period, divided by the number of shares outstanding.
Trailing 12-month dividend yield: Dividends over the prior 12-months are added together and divided by the current share price. Higher values indicate more dividends are being generated per unit of share price.
Trailing 12-month dividends: Dividends paid over the prior 12 months summed for the constituents within an index.
Trailing 12-month year-end dividend yield: Dividends over the prior 12-months at most recent calendar year-end are added together and divided by the current share price. Higher values indicate more dividends are being generated per unit of share price.
Transparency: The extent to which investors have ready access to any required financial information about a company, such as price levels, market depth and audited financial reports.
U.S. dollar (USD) sovereigns: debt denominated in U.S. dollars issued by an emerging market government.
Valuation: Refers to metrics that relate financial statistics for equities to their price levels to determine if certain attributes, such as earnings or dividends, are cheap or expensive.
Valuation risk: The risk of buying or over-weighting a particular stock that has appreciated significantly in price relative to its dividends, earnings or any other fundamental metric.
Value: Characterized by lower price levels relative to fundamentals, such as earnings or dividends. Prices are lower because investors are less certain of the performance of these fundamentals in the future.
Value stocks: Stocks whose share prices are lower relative to their earnings per share or dividends per share. Investors pay less for these stocks because their earnings or dividend growth expectations going forward are lower.
Very large-size markets: Markets that are greater than the average daily trading volume of the fund.
Volatility: A measure of the dispersion of actual returns around a particular average level.
Weight of optimized constituents: The weight of the constituents excluded as a result of any optimization. A lower number indicates that the assets tracking the Index are closer to holding every security within the Index in its prescribed weight.
Wholesale Prince Index (WPI): An index that measures and tracks the changes in price of goods in the stages before the retail level. Wholesale price indexes (WPIs) report monthly to show the average price changes of goods sold in bulk, and they are a group of the indicators that follow growth in the economy.
WisdomTree Australia Dividend Index: Index designed to measure the performance of dividend-paying companies in Australia. At maximum the 10-largest Australian dividend-paying companies are selected from each of the 10 sectors on the basis of their market capitalizations. Weighting is by dividend yield.
WisdomTree Dividend ex-Financials Index: The Index measures the performance of high dividend-yielding stocks outside of the financial sector. The Index consists primarily of large- and mid-capitalization companies listed on major U.S. stock exchanges. Weighting is by dividend yield.
WisdomTree Dividend Index: Measures the performance of dividend-paying companies incorporated in the United States that pay regular cash dividends and meet WisdomTree’s eligibility requirements. Weighted by indicated cash dividends.
WisdomTree Dividend Index of Europe, Far East Asia and Australasia (WisdomTree DEFA Index): A fundamentally weighted index that measures the performance of dividend-paying companies in the industrialized world, excluding Canada and the United States, that pay regular cash dividends and that meet other liquidity and capitalization requirements. It comprises companies incorporated in 16 developed European countries, Japan, Australia, New Zealand, Hong Kong and Singapore. Companies are weighted in the Index based on annual cash dividends paid.
WisdomTree Earnings Index: Fundamentally-weighted index that measures the performance of earnings-generating companies within the broad U.S. stock market.
WisdomTree Emerging Markets Equity Income Index: A subset of the WisdomTree Emerging Markets Dividend Index measuring the performance of the top 30% of stocks with the highest trailing 12-month dividend yields, weighted by cash dividends.
WisdomTree Emerging Markets SmallCap Dividend Index: A subset of the WisdomTree Emerging Markets Dividend Index measuring the performance of the smallest firms by market capitalization comprising 10% of the total market capitalization weighted by cash dividends.
WisdomTree Equity Income Index: Measures the performance of the 30% highest-yielding dividend-paying equities within the WisdomTree Dividend Index, weighted by indicated cash dividends.
WisdomTree Europe Hedged Equity Index: Index designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the Euro and the U.S. dollar. Constituents are European dividend-paying firms with a least 50% of their revenues from outside of Europe. Weighting is by cash dividends paid.
WisdomTree Europe SmallCap Dividend Index: A fundamentally weighted index meant to measure the performance of small-cap European dividend-paying equities weighted by cash dividends paid.
WisdomTree Global Dividend Index: WisdomTree’s broadest measure of dividend-paying stocks, including firms incorporated in emerging markets, developed international markets and the United States, weighted by cash dividends.
WisdomTree India Earnings Index: A fundamentally weighted Index that measures the performance of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors. Companies are weighted in the Index based on their earnings in their fiscal year prior to the Index measurement date, adjusted for a factor that takes into account shares available to foreign investors.
WisdomTree International Dividend ex-Financials Index: Measures the performance of high dividend-yielding stocks outside the financial sector. Selects the 10 largest dividend-paying stocks within each sector outside of financials, then the resulting list is weighted by dividend yield.
WisdomTree International LargeCap Dividend Index: A fundamentally weighted index that measures the performance of the large-capitalization segment of the dividend-paying market in the industrialized world outside the U.S. and Canada. The Index comprises the 300 largest companies ranked by market capitalization from the WisdomTree DEFA Index. Companies are weighted in the Index based on annual cash dividends paid.
WisdomTree International MidCap Dividend Index: A fundamentally weighted index that measures the performance of the mid-capitalization segment of the US dividend-paying market. The Index is comprised of the companies that compose the top 75% of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. The index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share.
WisdomTree International SmallCap Dividend Index: A fundamentally weighted index measuring the performance of the small-capitalization segment of the US dividend-paying market. The Index is comprised of the companies that compose the bottom 25% of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. The index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share.
WisdomTree Japan Hedged Equity Index: Index designed to provide exposure to Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese yen movements against the U.S. dollar. Constituents are dividend-paying companies incorporated in Japan that derive less than 80% of their revenue from sources in Japan. Weighting is by cash dividends paid.
WisdomTree LargeCap Dividend Index: Measures the performance of the 300 largest companies in the WisdomTree Dividend Index ranked by market capitalization. Weighting is by indicated cash dividends.
WisdomTree MidCap Dividend Index: A fundamentally weighted index that measures the performance of the mid-capitalization segment of the U.S. dividend-paying market. The Index comprises the companies that constitute the top 75% of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. The index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share.
WisdomTree Middle East Dividend Index: A fundamentally weighted index that measures the performance of companies in the Middle East that pay regular cash dividends on shares of common stock and meet specified requirements as of the Index measurement date. The Index is dividend weighted and updated to reflect market prices and exchange rates.
WisdomTree SmallCap Dividend Index: A fundamentally weighted index measuring the performance of the small-capitalization segment of the U.S. dividend-paying market. The Index comprises the companies that constitute the bottom 25% of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. The Index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share.
WisdomTree U.S. Dividend Growth Index:A fundamentally weighted index designed to track the performance of dividend-paying companies in the U.S. that WisdomTree believes have the potential to increase their dividends due to certain factors, which include estimated earnings growth, return on equity and return on assets. Weighting is by indicated cash dividends.
Write-downs: Occur when assets on a firm’s balance sheet are reduced in value in a way thought to be closer to what the market’s current valuation would be, should those assets need to be sold at present. The impact of this lowering in value is felt on the income statement in terms of lower earnings.
Yield to maturity: The total returns of a bond received by an investor when a bond is held to maturity.
Yield to worst: The rate of return generated assuming a bond is redeemed by the issuer on the least desirable date for the investor.