...PORTFOLIO PERFORMANCE EVALUATION- LITERATURE REVIEW Deepa Chandrashekar Table of Contents 1. Introduction........................................................................................................................................... 2 2. Portfolio Returns Calculation................................................................................................................ 4 2.1. 2.2. Value weighted rate of return........................................................................................................ 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...
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...1985-1994 Determinants of Portfolio Performance Gary P: Brinson, L. Randolph Hood, and Gilbert L. Beebower recent study indicates that more than 80 per ,cent of all corporate pension plans with as.sets greater than $2 billion have more than 10 managers, and of all plans with assets greater than $50 million, less than one-third have only one investment manager. ~ Many funds that employ multiple managers focus their attention solely on the problem of manager selection. Only now are some funds beginning to realize that they must develop a method for delineating responsibility and measuring the performance contribution of those activities that compose the investment management process---investment policy, market timing and security selection. 2 The relative importance of policy, timing and selection can be determined only if we have a clear and relevant method of attributing returns to these factors. This article examines empirically the effects of investment policy, market timing and security (or manager) selection on total portfolio return. Our goal is to determine, from historical investment data on U.S. corporate pension plans, which investment decisions had the greatest impacts on the magnitude of total return and on the variability of that return. A Table I illustrates the framework for analyzing portfolio returns. Quadrant I represents policy. Here we would place the fund's benchmark return for the period, as determined by its long-term investment policy. A plan's benchmark...
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...Kochman’s and Badarinathi’s mathematical case for upside deviation deals with portfolio upside deviations being divided by a market’s upside deviations to so show the resulting ratio and how it facilitates other tests for positive or negative skewness. The article discusses how CAPM is inappropriate for the evaluation of portfolios given that is not only assumed that the returns on distributions are symmetrical, but that the beta (performance and return-to-risk ratios) underestimates the risk of larger numbers of mutual funds. Kochman and Badarinathi needed to answer two questions; can upside deviation be the means for portfolio evaluations and can this be done by taking the upside deviation of portfolios and divide those figure by the upside deviation of the market? Kochman and Badarinathi believe that to make a case for upside deviation as a means for portfolio evaluations is to take the upside deviation of the portfolio(s) and dividing it by the market(s) upside deviation. This would result with a ratio that facilitates another test of positive or negative skewness. To test whether the ratio of portfolio-to-market upside deviations as a success, a test on fund returns would need to be conducted to ensure a meaningful difference between upside deviations, portfolios, and markets. The overall findings showed that the relationships between low betas and low upside volatility appeared to be weaker than the relationships between high betas and high upside volatility. In addition...
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...run. In 2000 Black and Decker Corporation was still reeling from the financial and strategic problems stemming from the company's acquisition of Emhart Corporation in 1989. In late 1998 Black & Decker management celebrated the completion of an almost decade-long effort to divest nonstrategic business gained through its 1989 acquisition of Emhart Corporation and expected the company to enter a long-awaited period of growth as its entire management refocused its attention on its core power tools, plumbing, and security hardware business. Archibald believed that "This portfolio restructuring will allow us to focus on core operations that can deliver dependable and superior operating and financial results." However the portfolio restructuring did little to improve the market performance of the company's securities. Yet Archibald and the management continued to express confidence that the company's streamline portfolio would allow Black & Decker to achieve revenue and earnings growth that the market would find impressive. So far the 1998 divestitures have not produced steady increases in the company's stock price, but look promising for the future due to the efforts to refocus efforts on the successful power tools line. Strategic planning team evaluation Over the years, Black & Decker has branched off into many different directions in order to gain as much market share as possible. The diversification program in the 1980s produced mixed results for shareholders, and later...
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...Rock, Paper, Scissors, and Other Investment Techniques (UOP) FIS 240 Week 5 DQs (UOP) FIS 240 Week 6 CheckPoint: So Many Businesses, So Little Money PART 1 OF 2 (UOP) FIS 240 Week 6 CheckPoint: So Many Businesses, So Little Money PART 2 OF 2 (UOP) FIS 240 Week 6 Assignment: Analyze This (UOP) FIS 240 Week 7 DQs (UOP) FIS 240 Week 7 CheckPoint: Income that Sticks PART 1 OF 2 (UOP) FIS 240 Week 7 CheckPoint: Income that Sticks PART 2 OF 2 (UOP) FIS 240 Week 8 CheckPoint: Lifetime Investment Matrix PART 1 OF 2 (UOP) FIS 240 Week 8 CheckPoint: Lifetime Investment Matrix PART 2 OF 2 (UOP) FIS 240 Week 8 Assignment: Living the Easy Life (UOP) FIS 240 Capstone Discussion Question (UOP) FIS 240 Final Project: Investment Policy and Portfolio Evaluation (UOP) ____________________________________________________ FIS 240 Week 1 CheckPoint: Is Time on My Side (UOP) For more course tutorials visit www.tutorialrank.com Resources: Appendix D and the Time Value of Money multimedia (enter into the Axia College student webpage first then copy and paste the link into the open browser) TUhttps://ecampus.phoenix.edu/secure/aapd/UBAM/Libraries/Flash/TVM.swfUT. Due Date: Day 5 [post to the Individual forum] Complete your responses to this week’s CheckPoint in Appendix D. Post the completed...
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...work and needs to plan accordingly. One main question that is always a difficult one to answer is how long one needs to work before they can comfortably stop working and rely on their financial portfolio to take care of expenses after work. In order to analyze these questions, a deterministic model of an investment portfolio was created and stochastic modeling was used to determine the likelihood of being able to accumulate the necessary finances over the desired period of time. Quantitative Analysis: 1. Using the given deterministic model, the annual outflows were estimated from the retirement portfolio over the retirement years and the estimated return on the account was also calculated. It was determined that under these basic assumptions of salary and portfolio growth rate the portfolio could expect to grow to $452,900 within thirty years. However, this assumed a fixed salary growth rate of 5% as well as a 4% annual investment rate. Given the high rate of inflation and the projected expenses after retirement, it was calculated that if this money was to last for the retirement, then even pulling out $50,000 per year in expenses would cause the account to run out after just a few years. 2. Adjusting the annual rate to 8% from 4% had a major effect. Although the portfolio fell short of the one million dollar goal by only reaching $853,633, this was a major effect as it allows the individual the ability to pull $100,000 each year from this account and still sustain...
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...Fidelity Large Cap Stock Fund and S&P 500 are similar funds. These two funds heavily invest in large market capitalization company common stock, topping 80% of its entire portfolio. Fidelity Large Cap Stock Fund consists of normally 11 different sectors for equities listed in highest portfolio weight with first five sectors making 80% of the portfolio: • Financials • Information Technology • Health Care • Energy • Industrials • Consumer Discretionary • Consumer Staples • Telecommunication Services • Materials • Utilities • Other Current year-to-date performance of the Fidelity Large Cap Stock Fund (FLCSX) was overall positive at 16.24% year-to-date return. The financial sector contributed and played a big part in making the successful performance this year resulting from a good portfolio mixture of securities and its positive gain. This mixture consists of some of the high return securities such as; JPMorgan Chase, MetLife and Charles Schwab returning, 29.38%, 48.68% and 54.99% respectively. The historic performance has shown that both MetLife and Charles Schwab performed well responding to the rising interest rates, and these two companies did not fail to positively react to the recent increase in interest rates. Both companies’ share price went up by more than 20%. Thanks to the uptick in interest rates due to many speculation of slow economy recovery in the market. S&P 500 also had a strong year-to-date return at 13.82%. Both FLCSX and S&P 500 topped...
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...EVALUATION OF MUTUAL FUND PERFORMANCE TUGAS IV MAY 1, 2016 KIKI NINDYA ASIH AND NICKO ALBART DMB 10 ABSTRACT This article attempts to measure performance of three stock-based mutual funds in Indonesia over the period of January 1, 2015 – July 30, 2015 using daily data. Each of the stock-based mutual fund was picked randomly from foreign, SOE, and local investment houses. The performance evaluation employs different methods namely Sharpe, Treynor, and Jensen indices. Analysis revealed that different methods yield different result. In order to enrich evaluation, Modigliani-risk adjusted performance metric and qualitative approach were included in the analysis. By using the mix criteria, it was found that the best investment is Schoder 90 Plus Equity Fund followed by Manulife Dana Saham and Mandiri Investa Dynamic Equity. This findings show that even though stock market performed negatively over the period, stock-based mutual fund may yield slightly better than the market. Key Words: Mutual Fund, Sharpe Index, Treynor Index, Jansen Index, M2. I. INTRODUCTION This paper aims at measuring portfolio performance of stock-based mutual funds from three different investment manager over the period of January 1, 2015 – July 30, 2015. Three randomly mutual fund was chosen, namely Schoder 90 Plus Equity Fund (Schroder Investment Management Indonesia), Mandiri Investa Dynamic Equity (Mandiri Manajemen Investasi), and Manulife Dana Saham (Manulife Aset Manajemen...
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...Judge the Risk by Portfolio When the investors put their money into the stock market, it means that they must take the risk of the stock market, because risk is one of the natural qualities of the stock market. One company easy to get a poor performance and its stocks will go down. Therefore, there will be no way to complete avoid risk, but judge it. In finance, risk is best judged in a portfolio context. Because the possibility that many companies gets serious performances, and their stock price go down at the same time is lower than for only one company. This essay will discuss that why the portfolio context is the best way to judge the risk in the finance market. The first part will introduce the basic theories for portfolios. The methods of measuring risks and value of the portfolio will be explained in the second part to demonstrate that why it is better select portfolios. The third part will give the example of family groupings on performance of portfolio selection in the Hong Kong stock market. The conclusion will be given at the end of the essay. Firstly, the theory of portfolio and the five suppositions of portfolio selection need to be explained before the following discussion of the value of portfolios. The article ‘Portfolio Selection’, which was issued on Journal of Finance in 1952 and the book ‘Portfolio Selection: Efficient Diversification of Investments’ which was published in 1959 was known as the opening if the modern portfolio theory. The author of these...
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...Modern Portfolio Theory in the Modern Economy: MPT During the Credit Crisis 0f 2008 Abstract There are various theories of risk and return as it pertains to measuring and predicting investment return in a portfolio- one of the oldest and most prominent being Modern Portfolio Theory .An example of a hypothetical portfolio utilizing the principles of MPT invested during the credit crisis of late 2008/early 2009 will be utilized in part. In direct application, does Modern Portfolio theory hold strong during a major financial crisis? Past research will be compared to present the mechanics and applications of MPT order to answer the questions poised and to create hypothetical portfolios based on past fund performance during the time period of 2007 -2010. It is expected that a portfolio using MPT would not have performed significantly better than any other less diversified investment. Contents Introduction……………………………………..........................................................................4-7 Credit Crisis Thesis Statement Modern Portfolio Defined Prior Research Prediction Method…………………………………………………….........................................................8-9 Parameters/ Source of Portfolios Results……………………………………………………......................................................10-19 A. Application/ graphs Conclusion…………………………………………...............………………………............19-20 Restatement of Thesis Discussion of Results Limitations Recommendation References……………………………………………………………………...
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...“Diversification,” “Dollar Cost Averaging,” “Asset Allocation,” “Random Walk Theory,” “Efficient Market Hypothesis,” “The Optimal Portfolio,” and “Capital Asset Pricing Model” (Investopedia, 2010, p. 1-8). The Risk/Return Tradeoff concept is also known by another name. This name is “the ability-to-sleep-at-night-test.” Although some individuals can deal with the ups and downs of the financial market, some fear that they may fall off the ladder. With this, the investment’s risk will come into play. The company needs to decide how much risk will be necessary for them to be comfortable with their investments. The definition of risk in the investing world is the chance that in point of fact the return on the investment will be different from expected. Standard Deviation in statistics is the measurement used in this instant. In other words, risk means that there is a possibility of losing part or all of the original investment. So if this is the meaning of risk, then risk/return tradeoff means that there must be a balance between the lowest of risk and the highest of return (Investopedia, 2010). Diversification is another concept that the business uses. This is a technique that is used to mix a wide variety of investments that can be found in a portfolio to minimize the impact that any of the securities that can be found in a portfolio will have on the performance of that same investment....
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...demonstrations, performance assessment, and portfolios. Other activities included in this type are teacher observation and student self-assessment. * Components of Alternative Assessment a) Assessment is based on authentic task that demonstrate students’ ability to accomplish communication goals. b) The teacher and students focus on communication, not on right and wrong answers. c) Students help the teacher to set the criteria for successful completion of communication tasks. d) Students have opportunities to assess themselves and their peers. Performance-based Assessment Performance assessment ( Mueller, 2010) is an assessment in which students are asked to perform real world tasks that demonstrate meaningful application of essential knowledge and skills. It is a direct measure of student performance because the tasks are designed to incorporate context, problems and solution strategies that students would use in real life. It focus on processes abd rationales. There is no single correct answer; instead students are led to craft polished, thorough and justifiable responses, performances and products. It also involved long-range projects, exhibits, and performances that are linked to the curriculum. In this kind of assessment, the teacher is an important collaborator in creating tasks, as well as in developing guidelines for scoring and interpretation. Details regarding performance-based assessment will be discussed in chapter 7. Performance-Based...
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...attribute this effect to the fact that investors underreact to the release of firm-specific information. In detail, they compared the performance of stocks that have performed well in the past with those that have performed poorly, in 3-12 months’ time. Their theory is if stock prices either overreact or underreact to information consistently then profitable trading strategies that select stocks based on their past returns will exist. Previous studies in this area had shown that over a 3 to 5 year horizon, stocks that had performed poorly over the previous 3 to 5 years achieved higher returns than stocks that performed well over the same period. Their study covered the period from 1965 to 1989, involved ranking each company at the beginning of each month by its returns over the last ‘J’ months. Based on these rankings, ten equally weighted decile portfolios are constructed, with the portfolio comprised of those companies with the strongest historical returns and the portfolio with the lowest historical returns. The timeframes for both ‘J’ and ‘K’ horizons were 3, 6, 9 and 12 months. They constructed portfolios based on companies’ 3 month historical returns, and looked at their performance over the subsequent 3, 6, 9 and 12 months. The paper focused largely on the ‘zero cost’ portfolios, representing the difference in performance between the ‘winners’ and ‘losers’. It is important to note that momentum strategy appears to be temporary in nature. Over short...
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...highly useful application for delivering learning. We also believe the overall environment can be enhanced and complemented by a learner-centred personal learning environment such as Mahara. Pan-institutional learner communities can also be encouraged using Mahara. Mahara’s architecture is inspired by the modular, extensible architecture of Moodle. The Mahara team has also been heavily involved in the Moodle community, with recent work mostly focused on Moodle Networks. Similarly, Mahara systems can be networked together as well having single sign-on from Moodle 1.9 upwards. In a sense, we see Mahara as a ‘sister’ application although the two systems are not required to go together. Mahara will continue to evolve as a ‘pluggable’, modular e-Portfolio system designed to leverage Web 2.0 web services and built with...
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...Conclusion: 9 References 10 To: Chief Financial Officer From: Chief Information Officer Date: November 29, 2014 RE: Wobbly Wheels IT Organizational Changes Introduction and Purpose: Over the past few years growth, of WW has not increased and it has remained stagnant due to the slow growth of the economy. In order to improve the growth of the organization, a few IT organizational changes are required that will help streamline the internal processes for WW to improve the overall business production and increase profit margin. Overall business can be improved by improving the current business operations, changing the roles and responsibilities of the staff members, upgrading to the new technology systems and the implementation of an IT portfolio management system. Leadership Philosophy: The leadership philosophy of the organization is to grow our business by meticulously serving the logistics needs of our customers offering excellence and value in everything that we do. Inspire our people and business partners to do their best, offering opportunities for personal development and success. Maintain a financially strong company that strives to give a competitive return to our shareholders. Our mission is to lead by example as a responsible, caring, and sustainable company making a positive difference in the communities in which we serve (UPS, INC. 2013). The memorandum addresses all the key issues in the current implementation and the solutions for those key issues. This memorandum...
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