Glossary: terms starting with U
9 terms from UCITS to Utility token, briefly explained and with a source where possible. All terms from A to Z
- UCITS (OGAW, UCITS fund)
Undertakings for Collective Investment in Transferable Securities: the EU framework for retail funds (OGAW in German), with rules on diversification, liquidity, custody and disclosure. Almost all ETFs offered in Germany are UCITS funds.
- Ulcer index
The square root of the average of the squared percentage declines from the previous peak. It penalizes deep and prolonged drawdowns, but not upward fluctuations.
Source: Martin and McCann (1989)
More: Risk metrics beyond the Sharpe ratio: Treynor, Calmar, Omega, Ulcer Index and more
- UMD (WML, Momentum factor, MOM)
Up minus down: return of the winners of the last twelve months (excluding the most recent month) minus the losers. The fourth factor in Carhart's model.
Source: Carhart (1997); Jegadeesh and Titman (1993)
More: Tactical allocation: momentum, dual momentum and trend following · Methodology: Factor regression, factor allocation and factor statistics: methodology
- Uncovered interest parity (UIP, Uncovered interest rate parity, Interest rate parity theory)
Assumption that a high-interest currency depreciates on average by exactly the interest rate differential, so that unhedged investments in all currencies have the same expected return. In the data it holds poorly over short periods, and that is what the carry trade lives on.
Source: Hansen and Hodrick (1980); Froot and Thaler (1990)
More: Carry trade: earning interest with currencies and bonds
- Underwater curve (Drawdown curve, Underwater chart)
The distance from the most recent peak, plotted over time. It shows all drawdowns at a glance: how deep, how long and how often a portfolio was under water.
- Unit root (Unit root test, Dickey-Fuller test)
The property of a non-stationary time series that wanders like a random walk and does not return to a mean. The Dickey-Fuller test checks for it; cointegration tests build on it.
Source: Dickey and Fuller (1979)
- Upside capture ratio
How much of a benchmark's gains a portfolio captures in the benchmark's positive periods, in percent. 80 means that in up months the portfolio earned 80% of the index return on average.
Example: Index averages +2.5% in up months, fund +2.0%: upside capture 2.0 / 2.5 = 80.
Source: Bacon (2008)
More: Beta and alpha: how closely a fund moves with the market
- User cost of housing (User cost, User cost of owner-occupied housing, Cost of home ownership)
Annual economic cost of an owner-occupied property: mortgage interest and the forgone return on equity, maintenance, property tax and non-recoverable costs, spread-out purchase costs, minus the expected appreciation. If it is below the rent for an equivalent home, the numbers favor buying.
Example: User costs of 4.57% of the purchase price correspond to a fair purchase price of 1 / 0.0457 = 21.9 years' rent.
Source: Poterba (1984); Himmelberg et al. (2005)
- Utility token (Utility tokens)
A crypto-asset that only provides access to a good or service of its issuer, e.g. the use of a platform. Under MiCA it counts among the other crypto-assets; it confers no claim to profits, interest or repayment.
Source: BaFin, MiCAR (2024)
More: Digital assets: tokenization, stablecoins, crypto securities and the digital euro
Brief, simplified explanations; not investment or tax advice.