...Back to the Drawing Board Investors are having to rethink the foundations on which they build their portfolios By JOHN FERRY AND MIKE FOSTER Updated April 12, 2010 12:01 a.m. ET The recent financial crisis has all but torn up the investment rule book—received wisdoms have been found wanting if not plain wrong. Investors are being forced to decide whether the theoretical foundations upon which their portfolios are constructed need to be repaired or abandoned. Some are questioning the wisdom of investing in public markets at all. ENLARGE ROBERT NEUBECKER Many professional investors have traditionally used a technique known as modern portfolio theory to help decide which assets they should put money in. This approach examines the past returns and volatility of various asset classes and also looks at their correlation—how they perform in relation to each other. From these numbers wealth managers calculate the optimum percentage of a portfolio that should be invested in each asset class to achieve an expected rate of return for a given level of risk. It is a relatively neat construct. But it has its problems. One is that past figures for risk, return and correlation are not always a good guide to the future. In fact, they may be downright misleading. "These aren't natural sciences we're dealing with," says Kevin Gardiner, head of investment strategy for Europe, the Middle East and Africa at Barclays Wealth in London. "It's very difficult to establish underlying models and...
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...CONCORDIA UNIVERSITY John Molson School of Business - Department of Finance Portfolio Management - FINA 411/2/A, C Course Outline – Fall 2014 Instructor: Dr. Abraham I. Brodt Office: MB 12.215 Tel: 848-2424-2997 Fax: 848-4500 E-mail: ABrodt@jmsb.concordia.ca [SUBJECT: FINA 411 …….] Classes: FINA 411/2A Mondays 11:45 - 14:30 [MB1.437] FINA 411/2C Wednesdays 11:45 - 14:30 [MB5.255] Office Hours: Mondays and Wednesdays 15:30 -- 16:30 [Please e-mail me first to confirm] and by appointment COURSE DESCRIPTION: This course focuses on modern investment theory and its application to the management of entire portfolios. It will consist of lectures, discussions of cases and articles, and video presentations. Topics include: a) construction of optimal asset portfolios using techniques such as the single index model, b) extensions of the capital asset pricing model: theory and tests; example, the zero-beta model, c) criteria for evaluation of investment performance, d) active vs. passive portfolio management, e) investment strategies. The Formula Growth Investment Centre Lab will be used to demonstrate the use of specialized investment software. Computer exercises are assigned to illustrate the application of the theory. Prerequisites: FINA 380 or 385; FINA 390 or 395. LEARNING OBJECTIVES To understand the theory and practice of Portfolio Management for Individuals and Institutions, e.g. Endowments, Mutual Funds, Pension Plans, etc. ...
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...Letter of Transmittal Date: November 30, 2010 To Mr. Md. Maksudur Rahman Sarker, FCMA Professor Department of Accounting & Information Systems University of Dhaka Subject: Prayer for granting the Report. Dear Sir, Here is the report on “Personal Portfolio Management”. I shall be pleased to thank you for assigning me such an interesting topic. While dealing with the topic, I have gone through different books on portfolio management, local and international research papers, national dailies, annual reports, stock market websites and other world wide webs. It is a great pleasure for me that I have got a practical orientation with portfolio management and the relevant finance theories. Though I have tried my best to include all deserving and relevant information and discussion in the report, it might be considered insufficient to your expertise. But I think you would be generous enough to evaluate the report with a merciful look considering my attempt and effort. Sincerely Yours, Mohammad Munir Hossen MBA-EVENING ID No. 10814062 Department of Accounting & Information Systems University of Dhaka TAble of contents |SL. No. |Topic |Page | | |Executive Summary |v | |1 |Introduction ...
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...Introduction to Portfolio Management Investing in securities such as shares, debentures, and bonds is profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well artistic skill. In such investments both rationale and emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one savings while it is acknowledged to be one of the best avenues for investing one saving while it is acknowledged to be one of the most risky avenues of investment. “It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called portfolio”. Creation of a portfolio helps to reduce risk, without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success. Portfolio Management An investor considering investment in securities is faced with the problem of choosing from among a large number of securities and how to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and how much to invest in each. The risk and return characteristics...
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...PURCHASING PORTFOLIOS: AN ASSESSMENT OF SUSTAINABLE SOURCING MARK PAGELL York University ZHAOHUI WU Oregon State University MICHAEL E. WASSERMAN Clarkson University Kraljic is widely viewed as a driving force behind the concepts of supply management and purchasing portfolios. Kraljic proposed that supply management professionals needed to engage in a new approach, embracing globalization, technology and risk. This article marked a critical juncture for supply chain management. Almost three decades later, it is evident that the purchasing portfolio concept has been widely adopted as an effective practitioner tool and a well-accepted tenet in the supply chain management literature. However, a recently completed study yielded interesting evidence of a potential shift in supply chain management, specifically, in sustainable sourcing. We recently observed that a number of leaders in sustainable supply chain management (SSCM) were not organizing purchasing portfolios in the manner suggested by Kraljic. We found organizations buying what would traditionally be leveraged commodities in a manner more appropriate for strategic suppliers. This unexpected observation suggests that the supply chain field may face another critical juncture, this time related to SSCM. This manuscript describes the observed phenomena and then, using an inductive approach, enhances the existing theory to explain what was observed. The end result is a modified sustainable purchasing portfolio model...
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... | |Co-requisites: N/A | |Other requirements: N/A | B. Course Description: This course provides theoretical knowledge as well as practical strategies on educational psychology that student teachers will need to become effective instructors. Various theories of development, teaching, and learning such as human development, cognitive and behavioral development, learner differences, information processing, and learning environments are presented with clear examples and illustrations. Importantly, based on this psychological background knowledge students are able to build up a framework for connecting theory and any educational situations they will deal with later in their own teaching practice. C. Course Objectives: |No. |Course Objectives...
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...Insurance and portfolio theory are the combined methods of internal controls. This paper will justify the need of internal control systems, insurance, and portfolio approaches, and why an internal control system is more beneficial. An internal Control system is responsibility of the Controller to analyze company performance in operations, compliance, and reporting as well as aid management in the development of budgets and goals (McCarthy & Flynn, 2004). Internal Control system is also responsibility to analyze and manage risks the company may encounter. An internal control system is composed of five interrelated components (AICPA, 2013): • Control Environment – the company’s fundamental values and directives. • Risk Assessment – the identification and analysis of possible material misstatements. • Control Activities – the policies and procedures used to identify and manage risk. • Information and Communication – the processing and distribution information needed to meet company objectives. • Monitoring- assesses the quality of the system’s performance over time. Insurance approach is a risk-financing tool for companies providing protection when a loss occurs. Most companies have insurance because not many organizations will be able to pay expenses following a loss. Even though insurance compensate losses it does not prevent any fraud in the company. Certain companies have a variety of insurance policies required by law as worker compensation. The portfolio approach...
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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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...CUSTOMER PORTFOLIO MANAGEMENT – The construct and performance Harri Terho Sarja/Series A-4:2008 Copyright © Harri Terho & Turun kauppakorkeakoulu ISBN 978-951-564-592-0 (nid.) 978-951-564-593-7 (PDF) ISSN 0357-4652 (nid.) 1459-4870 (PDF) UDK 658.8 658.89 658.8.012.2 Esa Print Tampere, Tampere 2008 ACKNOWLEDGEMENTS Writing this dissertation has been a huge learning experience. Over the years I have received great support from a large number of people. I wish to thank everyone who has helped me to make and complete this interesting journey. I would like to start with my supervisor, Professor Aino Halinen-Kaila. She encouraged me to begin working on the dissertation in the first place. She has always given me great freedom in my work, and has supported my occasionally unconventional research decisions. The numerous projects and discussions with her have really been an intellectual joy and also helped me to make progress. Aino, thank you: I would not be here without your contribution. I was honored to have Professor Thomas Ritter from the Copenhagen Business School and Professor Olli Kuivalainen of the University of Lappeenranta as the official examiners of my thesis. They gave me valuable and constructive comments on the manuscript. My colleagues have given me great support in completing the thesis. I wish to express my gratitude to Professor Rami Olkkonen, Professor (emer.) Helena Mäkinen, Professor Leila Hurmerinta-Peltomäki, Dr. Juha Panula...
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...Beth A. Walker Balancing Risk and Return in a Customer Portfolio Marketing managers can increase shareholder value by structuring a customer portfolio to reduce the vulnerability and volatility of cash flows. This article demonstrates how financial portfolio theory provides an organizing framework for (1) diagnosing the variability in a customer portfolio, (2) assessing the complementarity/similarity of market segments, (3) exploring market segment weights in an optimized portfolio, and (4) isolating the reward on variability that individual customers or segments provide. Using a seven-year series of customer data from a large business-to-business firm, the authors demonstrate how market segments can be characterized in terms of risk and return. Next, they identify the firm’s efficient portfolio and test it against (1) its current portfolio and (2) a hypothetical profit maximization portfolio. Then, using forward- and back-testing, the authors show that the efficient portfolio has consistently lower variability than the existing customer mix and the profit maximization portfolio. The authors provide guidelines for incorporating a risk overlay into established customer management frameworks. The approach is especially well suited for business-to-business firms that serve market segments drawn from diverse sectors of the economy. Keywords: customer portfolio management, market-based assets, financial portfolio theory, return on marketing, market segmentation The advantage...
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...as aid management in the development of budgets and goals (McCarthy & Flynn, 2004, p. 265). It is also their responsibility to analyze and manage risks the company may encounter. To perform these tasks controllers and company financial officers establish internal controls. A system of internal controls ensures preparation reliable financial statements, compliance with financial regulations, reduce risks, and identify and achieve short and long-term goals. Management uses internal controls to adapt to economic changes (AICPA, 2011, p. 2). Insurance and portfolio theory are approaches to managing and analyzing risk and play an important part in an internal control system. Internal Control Systems An internal control system is composed of five inter-related components, 1) Control Environment, 2) Risk Assessment, 3) Control Activities, 4) Information and Communication, and 5) Monitoring. The control environment is the company’s fundamental values and directives, risk assessment is the identification and analysis of possible material misstatements, control activities are the policies and procedures used to identify and manage risks, information and communication involves the processing and distribution of information needed to meet company objectives, and monitoring “assesses the quality of the system’s performance over time.” (AICPA, 2011, p. 6). The components are important to developing a framework of internal controls that, although not a guarantee, assist management in achieving...
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...Curriculum Source References The following references were used in the CFA Institute-produced publications Quantitative Methods for Investment Analysis, Analysis of Equity Investments: Valuation, and Managing Investment Portfolios: A Dynamic Process. Ackerman, Carl, Richard McEnally, and David Ravenscraft. 1999. “The Performance of Hedge Funds: Risk, Return, and Incentives.” Journal of Finance. Vol. 54, No. 3: 833–874. ACLI Survey. 2003. The American Council of Life Insurers. Agarwal, Vikas and Narayan Naik. 2000. “Performance Evaluation of Hedge Funds with OptionBased and Buy-and-Hold Strategies.” Working Paper, London Business School. Ali, Paul Usman and Martin Gold. 2002. “An Appraisal of Socially Responsible Investments and Implications for Trustees and Other Investment Fiduciaries.” Working Paper, University of Melbourne. Almgren, Robert and Neil Chriss. 2000/2001. “Optimal Execution of Portfolio Transactions.” Journal of Risk. Vol. 3: 5–39. Altman, Edward I. 1968. “Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy.” Journal of Finance. Vol. 23: 589–699. Altman, Edward I. and Vellore M. Kishore. 1996. “Almost Everything You Wanted to Know about Recoveries on Defaulted Bonds.” Financial Analysts Journal. Vol. 52, No. 6: 57−63. Altman, Edward I., R. Haldeman, and P. Narayanan. 1977. “Zeta Analysis: A New Model to Identify Bankruptcy Risk of Corporations.” Journal of Banking and Finance. Vol. 1: 29−54. Ambachtsheer, Keith, Ronald Capelle, and...
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...Summary of Harvard Management Company (2010) By: Satrio Abi and Yanuar Budi Baskoro * Harvard Management Company Introduction: Harvard Management Company is a company which built by Harvard University itself. That means HMC is a wholly owned subsidiary of Harvard University. The company built for managing the financial matter and development of the university. Because the company is wholly owned by Harvard University, the Directors of HMC is directly choosen by President and Fellow of Harvard College. The function of HMC is for managing University’s financing especially endowment. Endowment become the important income for HMC. The main job of HMC is to earn money for the endowment. The management do some investment to get the endowment funds. They have the unique ways to do the investment which is using the Hybrid Theory. This case is focusing on the endowment. * Endowment: Why endowment become so important? Because the endowment fund is used for developing the university. The fund is for establishing new research program, creating more scholarship for student and buy some new art and collection. The fund also for increasing financial aid, reducing tuition fee for students and improve facilities for learning such as hiring new profesional academic intiatives or creating new laboratorium for research. The total value of endowment for 1990 until 2009 is increased continuosly. The total value in 1990 is $4.7 billion, in 1995 is $7 billion, in 2000 is $18.3 billion...
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...1. INTRODUCTION 1.1. INDUSTRY ALLOCATION The assets, combined in this portfolio, have been chosen from three different industries – banking, retail and drug manufacturing industry. Each industry has its own characteristics and distinguishes from one another, for the purpose of creating a diversified portfolio. Factors, affecting the banking sector and Barclays Bank (the chosen asset) are related to the current economic crisis, interest rates and the policy led by the government (either encouraging spending or saving). On the other hand the retail industry, represented by Marks and Spencer in this portfolio, is affected by the current economic climate in term of disposable and discretionary income. The final industry, drug manufacturing, which is most dependent on research and development, which incur high input costs and require a lot of testing (meaning the business process is time-consuming), is represented by GlaxoSmithKline. The three industries can be affected by completely different factors in nature. 1.2. PORTFOLIO CONSTRUCTION This portfolio was constructed by stocks, listed only on the London Stock Exchange (LSE), with no interaction with emerging markets. Although international diversification is not present, the unsystematic risk is lower due to the investment in already developed market (LSE), allowing enough liquidity and establishing fair price of the assets. The three companies (Barclays Bank, Marks and Spencer and GlaxoSmithKline) are all blue chips, with...
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...Australian School of Business School of Banking and Finance FINS 2624 Portfolio Management Course Outline Semester 2, 2012 Part A: Course-Specific Information Part B: Key Policies, Student Responsibilities and Support Table of Contents 0 PART A: COURSE-SPECIFIC INFORMATION 1 2 2.1 2.2 2.3 2.4 2.5 3 STAFF CONTACT DETAILS COURSE DETAILS Teaching Times and Locations Units of Credit Summary of Course Course Aims and Relationship to Other Courses Student Learning Outcomes LEARNING AND TEACHING ACTIVITIES 1 1 1 1 1 1 2 2 3 3 4 4 4 5 6 6 5 6 7 1 2 2.1 2.2 2.3 2.4 2.5 3 4 COURSE RESOURCES COURSE EVALUATION AND DEVELOPMENT COURSE SCHEDULE ACADEMIC HONESTY AND PLAGIARISM STUDENT RESPONSIBILITIES AND CONDUCT Workload Attendance General Conduct and Behaviour Occupational Health and Safety KeepingInformed SPECIAL CONSIDERATION AND SUPPLEMENTARY EXAMINATIONS STUDENT RESOURCES AND SUPPORT 7 7 8 1 1 1 1 1 2 2 2 2 4 3.1 Approach to Learning and Teaching in the Course 3.2 Learning Activities and Teaching Strategies 4 ASSESSMENT 4.1 Formal Requirements 4.2 Assessment Details 4.3 Late Submission PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT PART A: COURSE-SPECIFIC INFORMATION 1 STAFF CONTACT DETAILS Lecturer-in-charge: Joakim Bang Room 311 Phone No: 9385 55484 Mobile: 04 0870 7830 (please keep it roughly within office hours) Email: j.bang@unsw.edu.au Consultation Times: Mondays 15:00 to 17:00, ASB 311. That's in my office in the west wing of the ASB building. Please...
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