Glossary: terms starting with S

A measure by Avellaneda and Lee of the distance of a stock's cumulative residual from its equilibrium, in equilibrium standard deviations. Below −1.25 the stock is bought and the factor sold short; above +1.25 the reverse.

Source: Avellaneda and Lee (2010)

More: Pairs trading and statistical arbitrage: idea, methods, research · Methodology: Long/short and statistical arbitrage: methodology

Asset that does not fall with equities in crises, or even rises, such as short-dated government bonds, gold or certain currencies. The effect often lasts only briefly and is not guaranteed.

Source: Baur and Lucey (2010)

More: Gold in a portfolio: safe haven, inflation hedge or just shiny?

The highest annual withdrawal, as a percentage of starting wealth and adjusted for inflation each year, that would only just not have used up the wealth over the period under review.

More: Safe withdrawal rate: how good is the 4% rule? · Methodology: Backtest methodology: data, process, rebalancing and costs

An observed slice of reality, e.g. 20 years of monthly returns. All metrics derived from it are estimates subject to uncertainty; a different period would have produced different values.

Regular purchase of fund units for a fixed amount. The contribution can be directed into underweight positions and so replace rebalancing without any sales.

More: Rebalancing: getting your portfolio back on course

A fund can be bought through regular contributions at a bank or broker. Many providers offer ETF savings plans with no order fee; the spread and the execution price still count.

More: Lump sum or dollar-cost averaging: invest a large amount at once or in installments?

Filing with the SEC as soon as someone holds more than 5% of a class of a US company's shares and intends to exert influence; typical of activist investors. Since a 2023 reform, it is due within five business days (previously ten days), and amendments within two business days. Passive investors usually file the shorter Schedule 13G instead.

Source: SEC, Schedule 13D (2023); Brav et al. (2008)

More: Legendary investors: the investment styles of the most famous investors, from Graham to Simons

Greenhouse gases from sources that a company owns or controls itself, e.g. power plants, blast furnaces or vehicle fleets.

Source: GHG Protocol (2011)

More: ESG ETFs: index rules, ratings, returns and the limits of sustainable funds

Indirect emissions from the generation of purchased energy: the electricity, steam, heating and cooling that a company consumes.

Source: GHG Protocol (2011)

More: ESG ETFs: index rules, ratings, returns and the limits of sustainable funds

All other indirect emissions in the value chain, from suppliers to the use and disposal of the products sold, divided into 15 categories. Often a company's largest source, but the hardest to measure.

Source: GHG Protocol (2011)

More: ESG ETFs: index rules, ratings, returns and the limits of sustainable funds

Dividend that shareholders can receive in cash or in new shares, sometimes at a discount to the market price. An index has to assume one of the options: at MSCI, the company's default option, and without one, the cash payment.

Source: MSCI Corporate Events Methodology (2022)

More: Smart indexing: added value for index funds around corporate actions and index changes

Removing patterns that repeat every year, month or week, and usually also calendar effects such as public holidays and the number of working days. With daily data, several such patterns overlap; Germany's Bundesbank has developed its own method for this.

Source: Ollech (2021)

Methodology: Economic pulse: how Portfolio Lab calculates early indicators

Trading of existing stakes in private markets funds. LP-led: an investor sells its fund interest together with the unfunded commitment, at a discount or premium to NAV. GP-led: the manager sells holdings from an old fund into a new vehicle, usually a continuation fund; existing investors choose between selling and rolling over. Because the manager sits on both sides of the deal, ILPA recommends, among other things, a fairness opinion and at least 30 calendar days to decide.

Source: ILPA (2023); Saccone (2024)

More: Private equity explained: strategies, fund structure, fees and what research shows about returns

An industry group into which companies are classified according to their business, e.g. technology, healthcare or financials. A common classification uses eleven sectors (GICS).

More: Look-through: what is really inside your ETFs

The fund lends out securities against collateral and a fee. The income reduces the tracking difference; the risk lies in the borrower defaulting at a time when the collateral is insufficient.

More: ETF basics: costs, replication and distributions

A loan secured by a securities portfolio. The credit line depends on the lending values of the securities, and the interest rate is usually above the money market rate. Using it to buy additional securities leverages your portfolio.

More: Leverage in a portfolio: return, risk, costs and margin calls

In the CAPM, the relationship between beta and expected return: the risk-free rate plus beta times the market premium. Empirically it is flatter than the model predicts.

Source: Sharpe (1964); Black (1972)

More: CAPM: the capital asset pricing model and the security market line

The starting value of the random number generator. With the same seed a simulation produces exactly the same paths; this makes results reproducible and comparisons between variants fair.

The fund's assets are legally separate from the assets of the fund company. If the company goes bust, they still belong to the investors, unlike with ETCs or ETNs.

More: ETF basics: costs, replication and distributions

A distortion caused by the choice of what is shown: only the best of many tested strategies gets published. Its metrics overstate the performance to be expected.

Source: Bailey and López de Prado (2014)

More: Backtest overfitting: when the past looks too good

The part of the active return that comes from choices within a segment, calculated with the benchmark weight: Wᵢ × (rᵢ − bᵢ).

Example: 30% benchmark weight, portfolio return in the segment 10% instead of 8%: 0.30 × 2 = 0.60 percentage points.

Source: Brinson et al. (1986)

More: Performance attribution: Brinson decomposition, factors and linking over time

A fund with illiquid assets and no fixed term that accepts new money continuously and redeems on fixed dates, limited by notice periods and caps. Redemptions are paid from a reserve of liquid assets and from inflows.

Source: Delegated Regulation (EU) 2024/2759 (2024)

All publicly available information, such as annual reports or news, is reflected in the price immediately. Fundamental analysis based on public data then yields no excess return.

Source: Fama (1970)

More: The efficient market hypothesis: why it is so hard to beat the market

Active ETF that does not publish its full holdings every day. In the US, such models work, for example, with a confidential account for the authorized participants and a continuously published indicative value; in Ireland, since April 2025 ETFs may also disclose their holdings only at quarter-end, provided enough information for arbitrage is available every day.

Source: Dechert LLP (2019); Doyle and Deane (2025)

More: Active ETFs: how they work and what they deliver

A variance that counts only downward deviations, i.e. those below the mean or below a minimum return. Its square root is the downside deviation.

Source: Sortino and van der Meer (1991)

More: Sortino ratio and Calmar ratio: measuring downside risk

Changing a single input while holding everything else constant, for example only interest rates by 100 basis points. It shows how sensitive a portfolio is, but is not yet a coherent scenario.

More: Scenario analysis and sensitivity analysis: stress testing equity, interest rate, credit and currency risk

The automated measurement of sentiment in texts such as news, annual reports or forum posts, using word lists, machine learning or large language models. General-purpose dictionaries wrongly classify many technical terms in financial texts as negative; that is why there are dedicated word lists for financial texts.

Source: Loughran and McDonald (2011); Lopez-Lira and Tang (2026)

More: Alternative data: job ads, Reddit, X, satellites and card payments

All investors can hold the same portfolio of risky assets and control their risk solely through the share they hold in the safe asset. The choice of the risky part is separate from risk appetite.

Source: Tobin (1958)

More: CAPM: the capital asset pricing model and the security market line

Risk that poor returns arrive right at the start of a withdrawal phase. With the same average return, considerably less is then left over.

More: Safe withdrawal rate: how good is the 4% rule?

The EU Sustainable Finance Disclosure Regulation, Regulation (EU) 2019/2088, applicable since March 2021. It requires disclosure of how financial products take sustainability risks into account and what sustainability characteristics or objectives they have; funds are classified under its Articles 6, 8 and 9.

Source: SFDR (2019)

More: ESG ETFs: index rules, ratings, returns and the limits of sustainable funds

Tankers that operate without Western services in order to circumvent sanctions such as the price cap on Russian oil. Ships that do not want to be seen can switch off AIS or transmit false information; such ships are then missing from public tracking data.

Source: Cardoso et al. (2025); Paolo et al. (2024)

More: Ship tracking data and satellite images: what they reveal about commodities · Methodology: Ships at chokepoints (beta): methodology

Trading in the securities of another, comparable company on the basis of confidential information about your own company. In SEC v. Panuwat, a US jury found in favor of the SEC in April 2024: an employee had bought calls on a comparable company before his employer was taken over.

Source: SEC, Panuwat (2024)

More: Insider trading: what is prohibited, what is allowed and what insider purchases reveal

A company buys back its own shares on the stock exchange and so pays money out to the shareholders who sell. The remaining shareholders then hold a larger stake. In the US, buybacks have increasingly replaced dividends since the 1980s, and they do not show up in the dividend yield.

Source: Grullon and Michaely (2002)

More: Dividend strategies and dividend ETFs under scrutiny: irrelevance, factors, risks

A variant of the same fund with its own distribution policy, currency, fee or currency hedging. It has its own ISIN but invests in the same portfolio.

Excess return over the risk-free rate divided by volatility.

Example: (7% − 2%) / 15% = 0.33.

More: Sharpe ratio: return per unit of risk

Selling a borrowed security in order to buy it back later at a lower price. Optimizations without a ban on short selling often produce negative weights; weight limits prevent this.

When the price of a heavily shorted stock rises, short sellers cover by buying in order to limit their losses. This drives the price up further. According to the SEC, this was not the main driver at GameStop in 2021; the rise was carried by positive sentiment.

Source: SEC (2021)

More: Alternative data: job ads, Reddit, X, satellites and card payments

Positions that live off selling volatility, such as sold options or short VIX products. Long stretches of steady gains, then rare, very large losses (negative skewness).

Source: Carr and Wu (2009)

Excess return of small companies over large ones. After its discovery around 1980 it weakened considerably, and it depends heavily on how quality is taken into account.

Source: Banz (1981)

More: Factor investing: understanding the Fama-French factors

Cboe index for the price of protection against sharp crashes in the S&P 500. Values around 100 indicate low demand for crash protection, values above 140 high demand.

More: VIX: how to read the stock market's fear gauge

A measure of the asymmetry of a distribution. Negative skewness means rare, large losses and many small gains, typical of equity indices and of selling options. Investors demand a premium for negative skewness.

Source: Harvey and Siddique (2000)

More: Skewness and kurtosis: why market crashes are more frequent than the normal distribution says

The seventh VIX future relative to the fourth, i.e. M7 / M4 − 1. It describes the medium-term part of the VIX futures curve, which medium-term VIX products track.

Methodology: Volatility dashboard: methodology

Index funds that weight not by market capitalization but by factors such as value, momentum, quality or low volatility. Rule-based and cheaper than active funds, but with factor risk.

Source: Ang (2014)

More: Factor investing: understanding the Fama-French factors

A program on a distributed ledger that executes agreed steps by itself as soon as the conditions are met, e.g. paying a coupon, calling for more collateral or exchanging tokens for cash. Errors in the code are executed too, and whether the code matches the legal contract has to be checked separately.

Source: Cong and He (2019)

More: Digital assets: tokenization, stablecoins, crypto securities and the digital euro

Implementing an index fund in a way that uses the leeway the market offers without losing sight of the index: more favorable choices in corporate actions, trading index changes away from the effective date, or skipping very small changes.

Source: Harding (2016)

More: Smart indexing: added value for index funds around corporate actions and index changes

Small minus big: return of small minus large companies. A positive loading indicates a tilt toward small caps.

Source: Fama and French (1993); Banz (1981)

More: Factor investing: understanding the Fama-French factors · Methodology: Factor regression, factor allocation and factor statistics: methodology

Platforms on which traders show their portfolios and other investors invest in their strategy, through a certificate or by automatically copying their orders (copy trading). Studies find more behavioral biases and higher risk taking.

Source: Heimer (2016); Apesteguia et al. (2020)

Like the Sharpe ratio, but divided by the downside deviation. Upside fluctuations do not count as risk.

More: Sortino ratio and Calmar ratio: measuring downside risk

Prices rise far above what earnings and prospects justify, driven by expectations that prices will keep rising. Bubbles are easy to recognize in hindsight, but hardly reliably beforehand.

Source: Shiller (2000); Fama (2014)

More: Speculative bubbles: what they are and how the LPPLS model detects them · Methodology: Bubble indicator (LPPLS): methodology

Yield of a zero-coupon bond for a given maturity. With spot rates, each payment of a bond is discounted at its own rate; they are derived step by step from coupon bonds or swap rates (bootstrapping), and forward rates are in turn derived from them.

Source: Tuckman and Serrat (2012)

More: Bond math: calculating price, yield, duration, convexity and spreads

How much a bond loses when its risk premium over government bonds rises by one percentage point. For a fixed coupon, roughly equal to the duration.

More: Duration: how strongly bonds react to interest rates

A token designed to hold a fixed value, usually 1 US dollar or 1 euro. Fiat-backed stablecoins hold bank deposits and short-term government securities for this purpose; other designs rely on crypto-assets or just an algorithm. Holders have a claim against the issuer, not a protected deposit; if they doubt the reserve, a run looms.

Example: A reserve of $10 billion, 70% of it in government bonds at 2.0% and 30% as deposits at 1.5%: income 0.7 × 2.0% + 0.3 × 1.5% = 1.85%, or $185 million a year.

Source: Gorton and Zhang (2023); BIS (2026)

More: Digital assets: tokenization, stablecoins, crypto securities and the digital euro

Weak growth and high inflation at the same time, as in the 1970s. The most difficult environment for classic equity-bond portfolios, because both asset classes can suffer.

Methodology: Macro dashboard and regime analysis: methodology

The square root of the variance: the typical distance of values from their mean. For returns it is called volatility; for samples you divide by n − 1 instead of n (Bessel's correction).

More: Volatility: how much a portfolio fluctuates

The uncertainty of an estimate, such as the mean: the standard deviation divided by the square root of the number of observations. It falls only slowly as data accumulate: halving the uncertainty takes four times as many observations.

Example: Monthly return 0.5%, standard deviation 4%, 120 months: standard error 4% / √120 = 0.37%.

The uncertainty of an estimated Sharpe ratio. For independent, normally distributed returns it is √((1 + SR² / 2) / (T − 1)) per period; negative skewness and fat tails increase it to √((1 − γ₃ × SR + (γ₄ − 1) / 4 × SR²) / (T − 1)), with the kurtosis γ₄ (3 for the normal distribution). It is annualized with √(periods per year).

Example: Sharpe ratio of 0.6 p.a. from 120 months, normally distributed: √((1 + 0.1732² / 2) / 119) × √12 = 0.32 p.a.

Source: Lo (2002); Bailey and López de Prado (2012); Opdyke (2007)

More: Deflated Sharpe ratio: how much skill is in a Sharpe ratio?

A time series is stationary if its mean, dispersion and dependencies do not change over time. Returns are approximately stationary, prices are not. That is why calculations use returns.

A block bootstrap with random, geometrically distributed block lengths. As a result the resampled series remains stationary, and the outcome depends less on a fixed block length.

Source: Politis and Romano (1994)

More: Bootstrap: future scenarios from your own history

The long-run share of time a Markov chain spends in each state: the distribution π with π A = π. With two states, the share of state 0 equals a₁₀ / (a₀₁ + a₁₀), where a₀₁ and a₁₀ are the two switching probabilities.

Example: Switching from calm to turbulent with 0.02 and back with 0.10 per week: turbulent 0.02 / (0.02 + 0.10) = 16.7% of the time, calm 83.3%.

More: Regime models: hidden Markov, Markov switching and more · Methodology: Regime methodology: how the hidden Markov model works

Long/short strategies that bet on temporary, statistically estimated mispricings: in pairs, in stocks against a factor or in large portfolios. Unlike true arbitrage, it is not risk-free; it only wins on average across many trades.

Source: Avellaneda and Lee (2010); Krauss (2017)

More: Pairs trading and statistical arbitrage: idea, methods, research · Methodology: Long/short and statistical arbitrage: methodology

Return divided by the average of the largest annual drawdowns (in one common version plus 10 percentage points). Related to the Calmar ratio, but less dependent on a single crash.

Source: Bacon (2008)

More: Risk metrics beyond the Sharpe ratio: Treynor, Calmar, Omega, Ulcer Index and more

A theory founded by Robert Fernholz on the long-term growth rates of portfolios and stock markets, with few assumptions about price behavior. A key result: a portfolio regularly reset to fixed weights grows faster than the weighted average of its positions.

Source: Fernholz and Shay (1982); Fernholz (2002)

More: Beyond Markowitz: estimation error, noise and true diversification · Methodology: Dimensions methodology: how Portfolio Lab counts independent risks

The relationship between equity and government bond returns. Since the late 1990s it has mostly been negative, which stabilized mixed portfolios; in phases of high inflation, such as 2022, it was positive.

More: 60/40 portfolio: the classic mix of equities and bonds

Call and put with the same strike and maturity bought together. Gains on large moves in either direction and loses the premium in a calm market. It is a bet on volatility.

Example: Strike 100, 91 days, price 100, 3% interest rate, 20% volatility: cost 7.96, break-even 92.04 and 107.96.

Source: Coval and Shumway (2001)

More: Option pricing: where fair option prices come from · Methodology: Option pricer: how Portfolio Lab values options

Out-of-the-money put and call with different strikes bought together. Cheaper than a straddle, but needs a larger move to turn a profit.

Example: Put 95 and call 105, 91 days, price 100, 3% interest rate, 20% volatility: cost 3.97, break-even 91.03 and 108.97.

More: Option pricing: where fair option prices come from

The long-term target split across asset classes, e.g. 60% equities and 40% bonds. It explains most of the variation in a portfolio's returns over time.

Source: Brinson et al. (1986); Ibbotson and Kaplan (2000)

More: 60/40 portfolio: the classic mix of equities and bonds

Scenario analysis with deliberately severe but still plausible assumptions: how much does a portfolio or a bank lose if several risk factors move unfavourably at the same time? Banks are required to run stress tests regularly.

Source: Basel Committee on Banking Supervision (2018)

More: Scenario analysis and sensitivity analysis: stress testing equity, interest rate, credit and currency risk

Price at which the holder of an option may buy or sell the underlying. If it is close to the current price, the option is said to be at the money.

A permanent change in a relationship from a certain point in time, e.g. after a shift in monetary policy or in the currency regime. Unlike a Markov regime, the old state does not return. Methods following Bai and Perron estimate and test the number and location of multiple breaks.

Source: Bai and Perron (1998)

More: Regime models: hidden Markov, Markov switching and more

Returns-based analysis following William Sharpe (1992): which mix of style indices replicates a fund most closely?

More: Sharpe's style analysis: what a fund really does

Grid of size (large, mid, small) and style (value, blend, growth) into which funds are placed based on their holdings. Returns-based style analysis arrives at a similar classification without holdings data.

More: Sharpe's style analysis: what a fund really does

Short-term loan to a fund secured by the investors' unfunded commitments. The fund buys on credit first and calls the money later; this shortens the J-curve and lifts the IRR, especially early in the fund's life, while the interest lowers the multiple. ILPA recommends reporting the IRR with and without the credit line and limiting drawings to 180 days.

Example: ILPA example: without a credit line IRR 6.62% and TVPI 1.45; with a two-year line IRR 7.98% and TVPI 1.35.

Source: ILPA (2017)

More: Measuring private markets: J-curve, cash flows, smoothing and public proxies

Basket of securities that a swap ETF with an unfunded swap actually holds. The fund swaps the basket's return for the index return via the swap; the basket can be composed completely differently from the index.

Source: Ramaswamy (2011)

More: Index replication: full replication, optimized sampling and swaps

Share of the simulated paths in which the money lasts to the end or a goal is reached.

More: Monte Carlo simulation: how safe is your plan?

Tanker class with a deadweight of about 125,000 to 180,000 t; the name comes from the size that originally could just pass through the Suez Canal. Portfolio Lab classifies tankers from 265 to under 320 m in length this way.

Source: Notteboom et al. (2026)

Methodology: Ships at chokepoints (beta): methodology

Growth in which not only the price but also the growth rate rises, i.e. faster than exponential. In the LPPLS model the growth rate rises without limit toward the critical time, while the price remains finite (singularity).

Source: Sornette and Cauwels (2015)

More: Speculative bubbles: what they are and how the LPPLS model detects them

The excess of assets over the present value of liabilities. In asset-liability management it is the risk of this surplus that is managed, not that of the assets alone.

Source: Sharpe and Tint (1990); Waring (2004)

More: Asset-liability management: aligning your wealth with future spending · Methodology: ALM methodology: how Portfolio Lab measures assets against liabilities

ECB survey of experts at financial and other companies, conducted four times a year since 1999: point forecasts and probability distributions for inflation, core inflation, growth and unemployment in the euro area. It contains no risk premium, but it is not a market price either.

Source: ECB, Survey of Professional Forecasters (2026)

More: Market expectations: what the yield curve, inflation-linked bonds and options reveal about the future · Methodology: Macro dashboard and regime analysis: methodology

A distortion that arises because only surviving funds or stocks appear in the data. Closed funds, mostly poor ones, are missing, so the past looks better than it was for investors.

Source: Brown et al. (1992); Malkiel (1995)

More: Active or passive investing: ETFs versus fund managers

A temporary halt to the redemption of units in an open-ended fund due to exceptional circumstances; during that time no units are issued either. In Germany, the regulator BaFin can also order it, and for German open-ended real estate funds an overly long suspension is followed by liquidation.

Source: KAGB (2026); KAGB (2013)

More: Liquidity risk: measuring market liquidity, liquidity premiums and the tools of open-ended funds

Extension of the Nelson-Siegel model by a second hump: six parameters describe the level, slope and two curvatures of the yield curve. The ECB uses it to estimate its euro area yield curves every day.

Source: Svensson (1994); ECB, yield curve methodology (2026)

Methodology: Macro dashboard and regime analysis: methodology

Five-parameter formula for the total implied variance of one maturity as a function of log-moneyness: w(k) = a + b(ρ(k − m) + √((k − m)² + s²)). It describes smile and skew smoothly and can be checked for absence of arbitrage.

Source: Gatheral and Jacquier (2014)

More: Option pricing: where fair option prices come from · Methodology: Option pricer: how Portfolio Lab values options

Synthetically replicating ETF: it holds a basket of securities and swaps that basket's return for the index return.

More: ETF basics: costs, replication and distributions

Protection against dilution: if a day's net inflows or outflows exceed a threshold, the fund shifts the unit price by a swing factor equal to the estimated trading costs, downwards for outflows and upwards for inflows.

Example: With 6% net redemptions, a 5% threshold and a 0.40% swing factor, departing investors receive $99.60 instead of $100.00 per unit.

Source: Jin et al. (2021)

More: Index providers and valuation points: why the same index is calculated differently

Swiss withholding tax of 35% on investment income such as dividends. Foreign investors can reclaim part of it on application within three years, depending on the tax treaty: residents of Germany, for example, 20 percentage points, with the remaining 15% credited at home.

Source: ESTV (2026)

Risk that hits all investments together and cannot be diversified away, such as recessions or interest rate shocks. According to the CAPM, only this risk earns a premium.

Source: Sharpe (1964)

More: CAPM: the capital asset pricing model and the security market line