...Ivey Cases https://www.iveycases.com/RegisterUser.aspx o Put the following two cases studies in your cart. Make sure Digital Download is selected which will cost $3.40 per case. o Burgundy Asset Management: The Wescast Investment Decision https://www.iveycases.com/ProductView.aspx?id=31479 o Valuing Wal-mart 2010 https://www.iveycases.com/ProductView.aspx?id=48332 o Download the Wal-mart case spreadsheet for free. o Valuing Wal-mart 2010 – Spreadsheet for students https://www.iveycases.com/ProductView.aspx?id=52705 Case Report Guidelines 1. Place case title at top of first page with team member names (maximum four members per team). 2. Answer questions in numerical order. 3. Include graphs and tables if appropriate. 4. Print out case report and hand-in at the beginning of class. Harvard Management Company (2001) Questions 1. Is HMC’s recent payout policy consistent with the goal of preserving the real (adjusted for Harvard’s expense growth) value of the endowment and its distribution into perpetuity? 2. Could payout be raised to meet recent budget pressures without changing the risk-return profile of the portfolio? 3. What value has the HMC’s policy portfolio asset allocations (compared to TUCS median) added to the endowment from the period 1992-2000? 4. What value has active portfolio management (deviating from the policy portfolio indexes and weights) added to the endowment from...
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...returns: implications for portfolio allocation by Marco Lombardi and Francesco Ravazzolo Monetary and Economic Department July 2013 JEL classification: C11, C15, C53, E17, G17. Keywords: Commodity prices, equity prices, density forecasting, correlation, Bayesian DCC. BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2013. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1020-0959 (print) ISBN 1682-7678 (online) On the correlation between commodity and equity returns: implications for portfolio allocation∗ Marco J. Lombardi† Francesco Ravazzolo‡ July 11, 2013 Abstract In the recent years several commentators hinted at an increase of the correlation between equity and commodity prices, and blamed investment in commodity-related products for this. First, this paper investigates such claims by looking at various measures of correlation. Next, we assess what are the implications of higher correlations between oil and equity prices for asset allocation. We develop a time-varying Bayesian...
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...decision to strongly emphasize in real returns. The focus point in the third part is to highlight the method of generation of an efficiency frontier and the advantage and drawbacks of the constraining portfolio weights. And finally, the most significant part we will discuss the beneficial and hammering consequences of considering TIPS as an additional asset class in Harvard’s policy portfolio. 1. the advantages and limitations of optimal portfolio allocations: Led primarily by the need to balance between the requirements posed by the nature of its sector, and its above the ground ambitions for success, Harvard Management Co. introduced the concept of the Optimal Portfolio Allocation as a primary method through which they approach the process of maximization of their risk/return utility function. One of the advantages of this process is the high extent to which this asset allocation alternative meets the nature and needs of this institution. Another essential advantage derives from the fact that through the systematic distribution of the weights determined by the implication of mean-variance analysis for all available assets, the supreme management of the enterprise improves his diversification on the basis of correlations and its capability to forecast the future performance from a long-run perspective. Nevertheless, this analysis would not be complete without the elaborations of the drawbacks accompanying the...
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...Beta Management Company July 21, 2014 Variable Measures | |Vanguard Index 500 Trust |California R.E.I.T. |Brown Group | |Standard Deviation |4.61% |9.23% |8.17% | |Expected Return |1.10% |-2.27% |-0.67% | | |Vanguard & California R.E.I.T. |Vanguard & Brown Group | |Beta |14.121% |111.488% | |Correlation Coefficient |0.0735 |0.6562 | In evaluating the risk characteristics on a stand-alone basis, we can conclude that Brown Group offers a better return than California R.E.I.T. as well as a more stable standard deviation. When considering standard deviation as a measure of risk, the higher the deviation, the higher the risk that exists. Although the expected return for both Brown Group and California R.E.I.T. are both negative, Brown Groups expected return of -0.67%, in addition to its lower standard deviation than that of California...
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...9-201-129 REV: OCTOBER 23, 2001 Harvard Management Company (2001) In February 2001, Jack Meyer gazed out of his fifteenth floor office window at a cold Boston Harbor and reflected on the set of issues facing Harvard Management Company (HMC). The HMC Board would soon be reviewing the Policy Portfolio – the long-term asset mix that was designed to balance Harvard’s aversion to risk against its needs for long-term endowment returns. The Policy Portfolio was the cornerstone of endowment management at Harvard, the “neutral” portfolio mix that anchored the central tendency of actual asset allocations over time, as well as the benchmark against which actual performance was measured and incentive compensation was calculated. The Board was also interested in a variety of related issues, including the complexity of the investment strategies employed, the effectiveness of their risk controls, and the design and administration of their compensation systems. The Role of the Endowment Harvard University had been founded in 1636, and from the beginning its endowment played an important role in the financial structure of the institution. As of June 2000, the endowment managed by HMC totaled approximately $18.2 billion. Each of the various schools within the University owned “units” in the endowment, much like an individual would own shares in a mutual fund. Spending from the endowment was distributed pro-rata to all schools on the basis of the units each school owned. The annual spending from...
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...LEARNING OUTCOMES LEARNING OUTCOMES Program: Master in Wealth Management Professor: Georges Hübner Title of course: Personal Portfolio Management ECTS Credits (teaching days): 3 Learning Objectives: * Consider the client from the point of view of his/her preferences for risk and return * Determine the risk and return of various asset classes and explain where the risk premium comes from * Understand and master the notion of risk factors and how they explain portfolio returns * Master the Equity Risk Premium and be able to discuss its determinants and evolution * Understand the basics of prospect theory and its influences on the PB client * Link the MiFID “suitability” criterion to investor profiles and identify their dimensions * Identify and avoid the pitfalls in portfolio advice * Go beyond the notions of strategic and tactical asset allocation to better serve the client * Include the investor’s objectives and constraints in the portfolio construction process * Adequately report portfolio performance and explain it is a clear fashion to investors * Adapt the measurement of portfolio performance to the preferences of the investor * Distinguish the types of managerial skills that generate the portfolio returns Topics covered: 1. Personal Portfolio Management I A. Investors’ preferences, risk and return 1. The notion of risk and the risk premium 2. Classical view of investors’ preferences ...
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...Los Angeles CA 90041 323-254-3072 eekim@cwmason.com Cover Pages Cover Pages Table of Contents Introduction Client Information Statement of Objectives Risk Profile Current Accounts Current Allocation Constraints Miscellaneous Expenses Asset Allocation Current vs. Target Allocation Investments Investment Evaluation & Selection Proposed Portfolio Investment Strategy Analysises Allocation Comparison Equity Investment Style U.S. Stock Sector Analysis Regional Exposure Fixed-Income Investment Style Credit Quality Interest-Rate Risk Mutual Fund Fees and Expenses Performance Risk and Return Statistics MPT Statistics Implementation Plan Action Plan Monitoring Your Progress Legal & Regulatory Agreement Appendices 1 2 3 3 3 3 3 4 4 4 4 4 4 4 5 5 5 5 6 6 7 7 7 7 7 7 8 8 8 8 9 9 9 9 10 Planning Reports Appendices Performance of Proposed Securities Risk Tolerance Questionnaire Data as of 3/30/2009 Page 3 of 10 John Doe IRA Investment Policy Statement Introduction The Investment Recommendation is a detailed list of the changes recommended to your current portfolio holdings. The recommended list of funds, stocks, and/or other investments has been selected in order to implement a new asset allocation policy with either a higher potential return than your current allocation, a lower level of risk, or a combination of both. This report also provides a high-level analysis to help you understand the overall effects of the recommendations on your equity and fixed-income...
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...elements of tax allocation, analyzes extensively the principal timing difference: accelerated depreciation for tax purposes and straight-line depreciation for published financial reporting, looks into the major aspects of SFAS No. 109, and explores the difference of GAAP and IFRS on tax allocation. 1. Income tax allocation In order to comply with IRS tax code and make sense of the tax expands for income statement analysis, income tax allocation involves with high level of complexity for financial statement. This paper tries to explain how income tax allocation works by comparing of accelerated tax depreciation versus straight-line for financial reporting. The paper will focus on the change from SFAS No. 109 from SFAS No. 96. The discounting of deferred tax liabilities is also mentioned and analyzed. Because of the timing difference between time of the tax return and the time of the publication of the financial statement, different taxable results incur from the IRS tax basis and the financial reporting basis. Although the different exist, the difference will be smooth out in the cumulated ways for years and years. Income tax expense and income tax liability are always differ from each other in figures, but with the difference deferred in next year. 1.1 History In 1967, APB Opinion No.11 replaced ARBs 43 and 44 under the requirement of comprehensive allocation. If there is any difference, comprehensive allocation requires rigid and absolute allocation, while partial...
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...Elier Suarez Fin4514 M,W 9-10:15 Chapter 5 homework Problem 1: A. An indexed investment represents a high diversified type of securities without the risk of systematic market exposure. This form of risk cannot be diversified within the company because it represents that one company’s fragility within the market itself. B. a. An active approach toward rebalancing the policy brings competent flexibility to multiple time periods and a more favorable strategic asset allocation. b. Indexing to asset increases the portfolios time frame and returns will not beat the market. The Index will mirror the value but won’t duplicate an independents stocks deficiency. c. Adopting a policy portfolio different from your peers can be viewed as aggressive and will differentiate RFM’s returns. Policy should reflect the companies risk willingness and asset allocation should be represented as cross-sectional. C. The type of investment program being suggested is tactical asset allocation because it involves making short-term adjustments to asset-class weights. This is primarily based on short term predictions among asset classes of performance. D. The asset-only approach ignores the investor’s liabilities while the ALM approach adopts the asset allocation that is best to support the liabilities. A dynamic approach to asset allocation benefits between multiple active periods. On the other hand, a major disadvantage to this approach is that is costly and...
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...Chapter 01 The Investment Environment Multiple Choice Questions 1. In 2007, ____________ was the most significant real asset of U.S. households in terms of total value. A. consumer durables B. automobiles C. real estate D. mutual fund shares E. bank loans See Table 1.1. Difficulty: Easy 2. In 2007, ____________ was the least significant financial asset of U.S. households in terms of total value. A. real estate B. mutual fund shares C. debt securities D. life insurance reserves E. pension reserves See Table 1.1. Difficulty: Easy 3. In 2007, ____________ was the most significant asset of U.S. households in terms of total value. A. real estate B. mutual fund shares C. debt securities D. life insurance reserves E. pension reserves See Table 1.1. Difficulty: Easy 4. In 2007, ____________ was the most significant liability of U.S. households in terms of total value. A. credit cards B. mortgages C. bank loans D. student loans E. other debt See Table 1.1. Difficulty: Easy 5. The largest component of domestic net worth in 2007 was ____________. A. non-residential real estate B. residential real estate C. inventories D. consumer durables E. equipment and software See Table 1.2. Difficulty: Moderate 6. In 2007, ____________ was the most significant real asset of U.S. nonfinancial businesses in terms of total value. A. equipment and software B. inventory C. real estate D. trade credit ...
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...was the most significant real asset of U. S. nonfinancial businesses in terms of total value. A) equipment and software B) inventory C) real estate D) trade credit E) marketable securities Answer: C Difficulty: Easy Rationale: See Table 1.4. 2. In 2005, ____________ was the least significant real asset of U. S. nonfinancial businesses in terms of total value. A) equipment and software B) inventory C) real estate D) trade credit E) marketable securities Answer: B Difficulty: Easy Rationale: See Table 1.4. 3. In 2005, ____________ was the least significant liability of U. S. nonfinancial businesses in terms of total value. A) bonds and mortgatges B) bank loans C) inventories D) trade debt E) marketable securities Answer: B Difficulty: Easy Rationale: See Table 1.4. 4. In 2005, ____________ was the most significant financial asset of U. S. nonfinancial businesses in terms of total value. A) cash B) trade credit C) trade debt D) inventory E) marketable securities Answer: B Difficulty: Easy Rationale: See Table 1.4. 5. The material wealth of a society is equal to the sum of _________. A) all financial assets B) all real assets C) all financial and real assets D) all physical assets E) none of the above Answer: B Difficulty: Easy Rationale: Financial assets do not directly contribute the...
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...Chapter 01 Investments: Background and Issues Multiple Choice Questions 1. Financial assets represent _____ of total assets of U.S. households. A. over 60% B. over 90% C. under 10% D. about 30% 2. Real assets in the economy include all but which one of the following? A. Land B. Buildings C. Consumer durables D. Common stock 3. Net worth represents _____ of the liabilities and net worth of commercial banks. A. about 50% B. about 90% C. about 10% D. about 30% 4. According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___. A. mutual fund shares B. real estate C. pension reserves D. corporate equity 5. According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ________. A. mortgages B. consumer credit C. bank loans D. gambling debts 6. ____ is not a derivative security. A. A share of common stock B. A call option C. A futures contract D. All of the above are derivative securities. 7. According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____. A. mutual fund shares B. corporate equity C. pension reserves D. personal trusts 8. Active trading in markets and competition among securities analysts helps ensure that __________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher...
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...Investment Environment Multiple Choice Questions 11. The material wealth of a society is equal to the sum of _________. A. all financial assets B. all real assets C. all financial and real assets D. all physical assets E. none of the above Financial assets do not directly contribute the productive capacity of the economy. 13. _______ are financial assets. A. Bonds B. Machines C. Stocks D. A and C E. A, B and C Machines are real assets; stocks and bonds are financial assets. Difficulty: Easy 14. An example of a derivative security is ______. A. a common share of General Motors B. a call option on Mobil stock C. a commodity futures contract D. B and C E. A and B The values of B and C are derived from that of an underlying financial asset; the value of A is based on the value of the firm only. 17. An example of a primitive security is __________. A. a common share of General Motors B. a call option on Mobil stock C. a call option on a stock of a firm based in a Third World country D. a U.S. government bond E. A and D A primitive security's return is based only upon the earning power of the issuing agency, such as stock in General Motors and the U.S. government. Difficulty: Easy 19. _________ financial asset(s). A. Buildings are B. Land is a C. Derivatives are D. U.S. Agency bonds are E. C and D A and B are real assets. Difficulty: Easy 20. The value of a derivative security _______. A. depends on the value of the related primitive security B. can only...
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...DEFENCE OF HISTORICAL COST ACCOUNTING i. Historical cost is relevant in making economic decisions. * Ijiri present 3 reasons historical cost is relevant for making decision * It effect the evaluation n selection of decision rules. It used the past info to measures the quality of their past decisions. * Provides input for satisficing notion where some managers make decisions that will support expected or satisfactory outcome. They are consider how much has already earned rather than how much mote they can earn. * It is used bcoz it imposed on decision makers by their environment. Eg: taxation decision n cost plus contract. ii. Historical cost is based on actual, not merely possible transaction. * Record done based on actual transactions made. * Ijiri- it possible to prepared a balance she on the basis of year-end market price without references to actual transactions. * Historical cost provides evidences for determining how efficiency management has meet their responsibilities. iii. Through history, FS based on historical cost have been found to be useful. * Mautz – “if whose who make management n investment decision had found financial reports based on historical cost useful over the years, changes in acctg would long since have been mad” iv. The best understood concept of profit is the access of selling price over historical cost. * People understand the basic notion of actual cost compared to...
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...Develop portfolio management skills (Asset Allocation, Security Selection, and Trading). 2. Understand how different securities fit into an investment management strategy. 3. Exposure to “real-life” trading mechanics of securities. Assignment 1. Design an investment portfolio by first allocating your $100,000 across four asset categories (domestic equities, foreign equities, bonds, and cash) and then choosing which securities you will buy within each asset category. 2. Record your portfolio in the table shown at the bottom of the rules. 3. You must follow certain rules listed below when designing your portfolio. 4. Create an account at StockLinkU by going to the following link: http://trading.stocklinku.com/student/register. Create your student account and pick a username that is not embarrassing since we may review results in class. 5. Register for the class by using the instructor supplied class name and registration code. 6. Implement your portfolio plan by purchasing the securities on your account within our game. 7. You will NOT be graded on your returns or your strategy for this part of the project. Instead you will be graded on how well you followed the rules. Grading will be done at the end of the quarter, but you may show your portfolio to the professor for comments. Rules 1. Asset Allocation Constraints You will choose how much to invest in each asset class (asset allocation) and which securities to buy (security...
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