requirements do client expect from their portfolio managers? We have two major requirements of a Portfolio Manager: 1. The ability to derive above average returns for a given risk class (large risk-adjusted returns); and 2. The ability to completely diversify the portfolio to eliminate all unsystematic risk. The client expect from their portfolio managers are to help them manage their money in less time. Most of the client requires a portfolio manager who can preserve their money on
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MANAGING INVESTMENT PORTFOLIOS WORKBOOK A DYNAMIC PROCESS Third Edition John L. Maginn‚ CFA Donald L. Tuttle‚ CFA Dennis W. McLeavey‚ CFA Jerald E. Pinto‚ CFA John Wiley & Sons‚ Inc. MANAGING INVESTMENT PORTFOLIOS WORKBOOK A DYNAMIC PROCESS The CFA Institute is the premier association for investment professionals around the world‚ with over 85‚000 members in 129 countries. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst®
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Portfolio Management Case 1: Alex Sharpe’s Portfolio Executive Summary As Alex Sharpe’s consultant‚ we recommend a portfolio of 78% S&P 500 and 22% of R.J Reynolds. This portfolio will generate an annual expected return of 8.86% (significantly higher than the index return 6.29%)‚ while the risk increases by only less than 10%. In Qualitative Analysis‚ we find that tobacco industry tends to move with the market less than the toy industry‚ which indicates that R.J Reynolds can diversity the
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abundance of alternate solutions to this problem such as sampling‚stealth assessment‚ multiple measures‚ social and emotional skills survey‚ game-based assessment‚ inspections‚ and performance or portfolio based-assessments. The method I find particularly useful is her idea of Performance or Portfolio based assessment. This allows teachers to monitor students progress over a extended time period so they are truly able to get a well rounded understanding of the students real comprehension of the
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including more data points to perform analysis. The arithmetic calculation provides an impartial estimate of future return because it is always more than the geometric. All assets classes reported positive returns from 1990 through 1999‚ while the S&P 500 index had the highest annual average return of 17.7%. The Russell 2000 had the second highest annual return with a standard deviation of 14.1% & 17.2%. Treasuries and bond returns were a poor performer relative to the other assets which were
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Lawrence Smith’s 1924 book Common Stocks as Long Term Investments […] was immediately cited by Yale’s Irving Fisher as an argument for investing in a diversified portfolio of equities over bonds.5 Fisher theorized that the trend towards investment in diversified portfolios of common stock had actually changed the equity premium in the 1920’s. Studies of various writers‚ especially Edgar Smith and Kenneth Van Strum have shown that in the long run stocks yield more than bonds. Economists have pointed
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vector and variancecovariance matrix given below: Asset Mean VarianceCovariance Matrix 1 2 3 0.06 0.12 0.03 1 0.3 0.3 0.3 1 0.3 0.3 0.3 1 Weights Ones Mean Portfolio Return 1 1 1 0.176666122 Portfolio Portfolio Portfolio Variance STD Constraint 2.42961 1.558721 1 0.079372 1.603166 -0.68254 To model the portfolio choice problem‚ I begin by highlighting the mean vector and giving it a name. To do this‚ left-click on cell c9 and drag down until cell c11 and then release. Then go
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exposure to each of these factors‚ and now summarized by a vector of factor loadings. The reward to the residual component in the return to a particular asset‚ unsystematic or idiosyncratic risk‚ can be made arbitrarily small simply by considering portfolios with an arbitrarily large number of assets. The basic point‚ however‚ is that the two theories capture two different sets of risks and address different aspects of the premium-awarding scheme for taking such risks. The CAPM‚ by its emphasis
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(18%)‚ Projects and presentations (15%)‚ and Final exam (55%) Textbooks: 1. Corporate Finance‚ by J. Beck and P. DeMarzo‚ 2nd edition 2011‚ Pearson Education‚ Inc. Hereafter BD. 2. Financial Markets and Corporate Strategy‚ by M. Grinblatt and S. Titman‚ 2nd edition‚ 2002‚ Irwin McGraw Hill. Hereafter GT. I. Introduction to Corporate Finance 1. Corporations (Vs sole proprietorships‚ partnerships and limited liability companies) Typical features: Separation of ownership and management
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The process of portfolio construction can be quite complex. Analysts go through reams of statistics – past performance‚ future potential‚ and industry knowledge and rely on personal insights into the market to arrive at the final list (UOP‚ 2009). Every investor aims to maximize returns while minimizing risk. Individual securities must be evaluated not only on the risk-return trade-off in isolation but also on their contribution to the risk-return tradeoff of the entire portfolio. This memo will
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