...| |Microsoft |20% |-0.33 | |Time Warner |10% |0.11 | |Disney |20% |0.02 | |Motorola |10% |-0.05 | |Home Depot |15% |-0.02 | | | | | |Average Return |-0.042 | |Risk Free | |-1.72 | | | | | | | |-1.76 | |STDEV | |0.15 | | | | | |Sharpe | |-11.65 | | | | | | | |5 Yr Average | | | |betas | | | |Return | | | | | |T-bond |25% |0.02 | | |Microsoft |1 | |Microsoft |20% |-0.33 | | |Time Warner |1.37 | |Time Warner |10% |0.11 | | |Disney |0.96 | |Disney |20% |0.02 | | ...
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.................................................... 6 2.3. 3. Time weighted rate of return......................................................................................................... 5 Internal rate of return .................................................................................................................... 6 Literature Review.................................................................................................................................. 7 3.1. Sharpe ratio ................................................................................................................................... 9 3.2. Sortino ratio ................................................................................................................................10 3.3. Treynor ratio ...............................................................................................................................12 3.4. Jensen ratio.................................................................................................................................. 13 Weaknesses of traditional performance measures ......................................................................................15 Conclusion...
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... such as the macro environment, the assumptions set, and the Shrinkage method used that accidentally downsizes some valuable stocks in out-‐samples as they are closely correlated are being ignored. By contrast, P3 will probably offer a “middle-‐choice” which will bring a promising and more stable return. 1 Portfolio Modeling and Evaluation: Beating the Market Platinum Fund TABLE CONTENT 1.INTRODUCTION 2.DATA 2.1.BASIC INFORMATION 2.2.DATA LIMITATIONS 3 3 3 4 3.METHODOLOGY 3.1. METHODS ON PORTFOLIO MODELING CONSTRUCTION 3.1.1. MARKET PORTFOLIO...
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...ZEUS ASSET MANAGEMENT INC. Huy Tu Nguyen 22491465 1. Overview of Zeus Asset Management Inc. Zeus Asset Management Inc. (ZAM) is an independent, employee-owned and money – management company founded in 1968 by Tim Landon and Jerry Schneider, offering services to both institutional and individual clients which is different to some other asset- management firms, therefore the firm has designed a number of portfolios to meet the needs of clients. The firm’s investment philosophy follows a conservative, risk-averse, quality-oriented approach to investment management to exploit the superior return from long term strategies. The company’s investment philosophy of risk-aversion and long term goal can be guaranteed by the firm’s strategy which focuses on teamwork with experienced staff, who have an average of 18 years of investment experience in the sector and have dealt with recession and major market downturns and most of them are CFAs, thus this high quality professionals allow ZAM serving its clients and performing the company’s strategies effectively. More specifically, with individually managed account, the company apply the minimum fund requirement of $2 million, and for those clients their portfolios are customized based on their investment objectives and risk-return profile alongside with other particular constraints, such as: tax, liquidity, legal restrictions, etc. Besides, ZAM has constructed a range of mutual funds, including equity fund, bond fund, balance fund...
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...Elijah Ongeri Matini BBM2735/14 BBM 413 Assignment a) Alpha A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. Alpha is one of five technical risk ratios; A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. The Jensen index, or alpha, bears some relation to the capital asset pricing model, or CAPM. The CAPM equation is used to identify the required return of an investment; it is often used to evaluate realized performance for a diversified portfolio. Because it's assumed that the portfolio being evaluated is a diversified portfolio (meaning that the unsystematic risk has been eliminated), and because a diversified portfolio's main source of risk is market risk (or systematic risk), beta is an appropriate measure of that risk. Alpha is used to determine by how much the realized return of the portfolio varies from the required return, as determined by CAPM. The formula for alpha is expressed as follows: |α = Rp – [Rf + (Rm – Rf) β] | Where: Rp = Realized return of portfolio Rm = Market return Rf = risk-free rate The Jensen index measures risk premiums in terms of beta (β); therefore, it is...
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...Assignment 3 1. Design a multifactor model with at least 2 factors besides the market factor, and answer the following questions. a) What makes your choice of factor a “factor” in multifactor model? b) Does the factor of your choice co-move with the market factor? If yes, should you include it along with the market factor? c) Describe how the stock return would be affected when the factor of your choice changes. d) Describe a scenario where one can benefit from trading on the factor of your choice. a) There is a variety of factors that can determine the returns on security. The market based factor is the return on the broad market index such as S&P 500. This market return is one of the factors in the model. Other factors include the following: • GDP growth rate. This factors shows overall macroeconomic conditions that tend to affect a stock’s performance. • Risk free rate of return. • 10 year T-bond interest rate that shows the required return on 10-year government bonds. • A company’s ROE as an indicator of its profitability. Therefore, the model will look like this: [pic], where betas show the sensitivity of return to the factor, rm is the market rate of return, rf is the risk-free rate, T-bond is the 10-year T-Bond rate and ROE is the return on equity (ROE). Generally, GDP has a positive effect on a stock return. Higher economic growth leads to more business opportunities...
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...Reexamination and revise of the empirical result from SANJEEV BHOJRAJ, PAUL HRIBAR, MARC PICCONI, and JOHN McINNIS: Making Sense of Cents: An Examination of Firms Shenglun Shi 2011 M.S. Information Systems, CIMS, New York University I. Theoretical Foundation: The trading strategy implied by Bhojraj, Hribar, Picconi and McInnis’s paper from The Journal of Finance VOL. LXIV, NO. 5 • OCTOBER 2009, was to distinguish the missers, who missed analyst forecasts by one cent, and the beaters, who beat analyst forecasts by one cent. The original Idea suggested that the stock market performance of the missers will outperform that of the beaters in the long run due to the myopic behavior of beatercompanies’ management. My strategy was to simplify and replicate the result by removing most of the other restrictions placed in the original paper, such as the restriction of market cap and industry. My construction of the strategy is as follows: Pick up the S&P 100 composite index stocks and compare the analyst estimation of Earnings Per Share (EPS) to the announced EPS by individual company. If the actual EPS beat the estimation by one cent (The Beaters), we sell short the stock in the threeyear horizon. If the actual EPS miss the estimation by one cent (The Missers), we buy the stock and hold for three years. Note that the portfolio of investment is equally weighted between all component stocks. Further examination of the data shows somehow very contrasting result: For the beaters, it is...
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...Research Questions 5 2.0 Literature review 5 2.1 Traditional Portfolio Measures …………………………………………………………….6 a. Sharpe ratio: 6 b. Treynor ratio: 7 c. Jensen Alpha: 8 d. Fama-French Model 10 2.2 Assumption to Models ……………………………………………………………………11 2.3 Possible Results ……………………………………………………………………………11 2.4 Limitations of the traditional models ……………………………………………………12 3.0 Academic Review 14 3.1 Types of Analysis Applied in Currency Markets ……………………………………14 3.2 Empirical Literature Review ……………………………………………………………17 3.2.1 Hedging in the Currency Market ……………………………………………………19 4.0 Individual Currency Index Returns ……………………………………………………20 4.1.1 The Factors ……………………………………………………………………………21 a. Trend 21 b. Value 22 c. Volatility 22 4.2 Individual Currency Manager Returns ……………………………………………………23 5.0 Limitation to study ……………………………………………………………………25 6.0 Critique of Data source ……………………………………………………………………26 7.0 Results From Previous studies ……………………………………………………………29 8.0 Conclusion 30 References List 31 Performance and Trading In Currency Markets 1.0 Introduction The financial money market or the currency market is one of the markets that reports high trading volume. Most investors are keen in the trends of financial markets both from a local and an international perspective (Fanchiotti, Canal, & Zúñiga,2002).Financial traders consider past information to establish the future movements of currency and the behavior of currency markets. Foreign exchange portfolios...
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...AN ANALYTICAL STUDY ON EFFICACY OF ALGORITHM FOR BOTH TRADING AND INVESTING AN ANALYTICAL STUDY ON EFFICACY OF ALGORITHM FOR BOTH TRADING AND INVESTING ABSTRACT INDEX AIM OF STUDY PURPOSE * The main agenda of this study is to test the basic oscillators like RSI and OBV is to identify the behavior of these early indicators in various types of market. The agenda of using moving average lag indicators like Bollinger band is to check how well these bands work in giving out trade signals. * The study aims to find out using Bloomberg terminal that whether combination of studies and Risk management help to enhance the performance of the indicators and do they really help to make a more profitable decision. * This study also intends to use some basic fundamental indicators to identify whether they can be used as tool to invest in securities and how well they are able to perform as compared to a benchmark index. The aim is to use a matrix of indicators, so that it can be also assessed whether combination of basic indicators are good enough to make portfolio creation judgment that can lead to market beating portfolio or not. * All the testing has been done using the Bloomberg terminal. LIMITATIONS * There are many lead, hybrid and lag indicators available in the market however not every single one can be tested. * The testing only targets the NSE that is typically Indian market, hence the results may be non-inferential for international markets...
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...Mackenzie Lamm Finance 450 11/18/14 Mutual Fund Paper Analysis of Northern Small Cap Value Fund The following information will outline and overview the Northern Small Cap Value Mutual Fund and whether or not the fund should be chosen as one of the investments currently offered for the employees’ 401-K plan at Rick Lamm and Associates. This report will first, cover the category and nature of the mutual fund, the strategy involved, and what type of investor would be interested. Second, the performance of the mutual fund, comparing the fund’s various returns to its respective category and index. Third, analyze the risks of the fund, and compare those risks with category averages. Fourth, the costs of the fund and how they compare with other funds of its nature. Fifth, the funds’ manager. To conclude, a recommendation will be offered whether or not the Northern Small Cap Value Mutual Fund should or should not be included in Rick Lamm and Associates’ 401-K plan. The Northern Small Cap Value Fund is an open ended mutual fund which looks for value potential (worth more than indicated current prices) by in the stocks of smaller companies. According to Northern Trust, the fund has 500 holdings and is mainly made up of four economic sectors. 37.5% of those holdings in financials, 15% in industrials, 12.2% in information technology, and 10.2% in consumer discretionary goods and services (Northern Trust). As stated on Northern Trust, the funds strategy to gain capital appreciation...
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...Development 2 Rue André Pascal, Paris 75116, France www.oecd.org/daf/fin/wp ABSTRACT/RÉSUMÉ Pension Fund Performance This report provides an analysis of aggregate investment performance by country on a risk adjusted basis using relatively standard investment performance measures. The report also describes privately managed pension funds around the world and the regulatory environment they face. It compares pension funds across countries according to total assets under management and asset allocation, and briefly discusses certain issues surrounding the data reported by pension funds and regulators on investment returns. JEL codes: G11, G23, C80 Keywords: Investment performance, pension funds, returns on investment, asset allocation, Sharpe ratio, Markowitz mean-variance portfolio maximization. ***** La Performance des Fonds de Pensions Ce rapport fournit une analyse par pays des performances d‘investissement ajustées en fonction du risque et en utilisant des mesures de performance standards. Le rapport décrit également les fonds de pensions privées dans le monde et les régulations auxquels les fonds doivent satisfaire. Il compare les fonds de pension par pays selon leurs actifs totaux et l‘allocation de ceux-ci, et examine...
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...Zeus Asset Management Inc Executive Summary Zeus Asset Management Inc is an asset management firm with more than $1.7 billion in asset under management. Zeus is well known for relationship-oriented that served both individual and institutional investors with the investment philosophy of believing that they could get a superior return over the long run using a conservative, risk-averse and quality-oriented approach. Zeus have been measuring it’s return in an absolute basis however Abbott demanded for it to be in risk adjusted basis to be better determine if Zeus outperform the relevant indices. The main problem with the current measure is that it did not take risk into consideration. The main aim in this case study is to determine if the current performance evaluation is sufficient or a better risk adjusted measure could be form. Other than that, we would also take into consideration of the difference between Zeus with its main competitors and how different type of investors would have different investment strategy due to their different risk preference. Problem with current measure As the current fund performance measurement consist mainly of holding period and benchmark return, these return have weaknesses that does not allow it to be a sufficient measurement. As a HPR generally calculated based on determining what the total return is earned from holding the investment for a specific period of time. The advantage of it is that it is easy to calculate and understand by...
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...CONTENTS BONDS 1 STOCKS 6 OPTIONS 10 FUTURES 16 PORTFOLIO PERFORMANCE EVALUATION 20 INTERNATIONAL INVESTING 26 BONDS Page 480 –CFA Problems Questions #1 1. Leaf Products may issue a 10-year maturity fixed-income security, which might include a sinking fund provision and either refunding or call protection. a) Describe a sinking fund provision. The sinking fund provision allows the firm to repurchase a fraction of the outstanding bonds at either the market price or the sinking fund price (usually set at par), depending on the structure of the provision. The provision may be for a specific number of bonds or a percentage of the bond issue. The bonds selected for repurchase are generally selected at random. b) Explain the impact of a sinking fund provision on: i. The expected average life of the proposed security. We would expect a fraction of the total bond issue to be retired before the stated maturity data under the sinking fund provision. Therefore, the sinking fund provision decreases the expected average life of the proposed security. ii. Total principal and interest payments over the life of the proposed security. The sinking fund provision does not affect the total principal payments that investors would receive. However, investors may receive their principal repayments earlier than expected if the firm invokes the sinking fund provision. The sinking fund provision could decrease the amount of interest payments investors would receive...
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...RSM330 Assignment 2 – Group Work Due: March 20, 2015 in class & online Question 1: Fundamental Analysis (Total 20 Marks) a) i. These two companies are both in the Auto Parts and Equipment industry. ii. The auto industry sells discretionary goods, which consumers can afford to purchase more of in a booming economy. Therefore these companies stocks are cyclical since their price can be affected by ups and downs in the economy. b) |Magma |2012 |2013 |2014 | |Net Profit Margin |4.6% |4.5% |5.1% | |Asset Turnover |1.9x |2.0x |2.0x | |Leverage |1.81 |1.86 |2.09 | |ROE |(4.6%)(1.9x)(1.81) |(4.5%)(2.0x)(1.86) = 16.74% |(5.1%)(2.0x)(2.09) | | |= 15.8% | |= 21.3% | |Linamar |2012 |2013 |2014 | |Net Profit Margin |4.5% ...
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...assist in making the correct decisions there are particular pieces of information of a company that is needed to help form the correct decision. Using this information assisted in arriving at selection of investments for Casta Bonita Ceramics. The four investments I decided on are Desktop, Inc. Leviathan Defense, Trans conduit, Inc., and Goldstein & Delaney Bank. By using diversification, techniques will help to achieve the highest returns. Portfolio diversity is essential to be considered when making proper implementations and decisions. The amount allotted for this portfolio is $800,000.00, amounts invested in each area of the portfolio is $216,327.00 in Desktop Inc., $175,939.00 in Levinthal Defense, $144,000.00 in Trans Conduit, Inc. and $221,348 Goldstein & Delaney Bank, totaling $ 757,614.00, with $42386 for cash Portfolio risk , Risk =17.19% with a return of 9.20%the Sharpe ratio is 25.86%. It was essential to have a better continuing portfolio for better income opportunity that made it a great investment possibility. The “budget allotted was $800,000” (Bodie, Kane, Marcus, 2008); for that reason my job was to set aside money in a way ensuring the realization of maximization of the portfolio yield. Exact guidelines regarding the “portfolio risk mentioned it couldn't go beyond 22%” (Bodie, Kane, Marcus, 2008). To appraise the risk as well as yield I designed a reference to the “Sharpe ratio”....
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