weight. That is, wa(t) = wp(t) -wb{t). wm{t) Kth asset's weight in the market portfolio, defined as posra(£) Next, we define estimates of a portfolio's return. These estimates assume that there are no intraperiod cash flows or intraperiod trading. For example, if we are to compute a portfolio's one-day return, then we would assume that the two assumptions hold intraday. Using these definitions we define the portfolio return on a managed, benchmark, and market portfolio as follows. For the managed portfolio, its one-period return from t - 1 to t is: r^^wtit-Vfait) (20.51) For the benchmark portfolio, its one-period return from t - 1 to t is: rfc(f)=5>i(f-i)2U') (20-52> "=1 For the active portfolio, its one-period return from t - 1 to t is: N r (t) = For the market portfolio, its one-period return from t - 1 to t is: {t) = ^wan{t-l)Kn{t) (20.53) ^ (20.54) rM(f)=5>£(f-l)2U') "=1 Cash The term "cash" broadly applies to any amount that invests in some risk-free (or very low risk) account. In an equity portfolio, cash usually is defined as the sum of: II The margin value of futures contracts. Portfolio managers equitize cash by buying futures contracts. II Trade date cash. This represents the cash available to buy and sell securities on any particular day. II The dollar (or equivalent) amount of repurchase agreements. Portfolio managers may lend funds short-term and earn interest (i.e., they enter reverse repurchase agreements). Reverses (lending) enter as positive cash whereas repurchase agreements are negative cash (borrowing). II The dollar (or equivalent) amount of any other short-term instruments held. In the United States, for example, this includes the dollar value of holding Treasury bills. In practice, cash enters the portfolio return calculation by simply changing the base (denominator) of the portfolio weight calculation. For example, consider a portfolio that has two assets with equity positions SlO and $2. Its portfolio weights