The Pros And Cons Of Post Modern Portfolio Theory

This was a simulation project related to application of different tools of portfolio management. The project was applied by using stocktrak.com platform. This website provides the students and teachers with a real time simulation platform for learning the portfolio investment. A specific allocated amount was used in this simulation project for portfolio investment. A portfolio was created of different securities like stocks, bonds and currencies. These bonds and securities were from different sectors of economy like technology industry, financial industry, consumer goods industry, services industry, health industry, industrial goods industry, utilities industry, and basic materials industry. The top performing stocks in this simulation project were Bank of America Corporation, Hersha Hospitality trust, Deans Food Company, Loews Corporation, and Pepsi Co Inc. The study also found that the percentage return on portfolio remained above the return realized on Dow Jones ETF during the timeline of the project.

Asset allocation is a portfolio management technique that is concerned with balancing between income-oriented and growth investments in a portfolio. This apportioning enables the investor to capitalize on the risk/reward trade off between the various assets in the portfolio and gain from both profits and growth. There are four basic steps to asset allocation; selecting which asset categories to include in the portfolio (stocks, bonds, real estate, money market, financial derivatives or precious metals), choosing the most suitable proportion to allot to each asset class, identify a suitable variety within the set target and then finally diversifying within each asset category.

(10) You have an equally weighted portfolio that consists of equity ownership in three firms. Firm A is trading at $23 per share and has a beta of 1.15; Firm B is trading at $16 per share with a beta of 1.60; Firm C is trading at $76 per share with a beta of 0.85. Assume a risk free rate of 2% and market return of 7%. If each stock has a standard deviation of 40% and the stocks have a correlation of 0.20 with each other, your portfolio's expected return is closest to

Diversification is a widely embraced investment strategy that helps ease the unpredictability of markets for investors (Graham Kenny, 2009). It has the key benefits of reducing portfolio loss and is particularly important during times of increased uncertainty (Craig L. Israelsen – 2010). Harry Markowisz (1952) stated that “by investing in more than one stock, an investor can gain in the benefits”. Modern Portfolio Theory provides the academic base for diversifying portfolios. MPT stated that it isn’t enough for a company to just rely on the expected risk and return of one particular stock. MPT also stated that when diversification created value to

Meeting 09/08/11 09/13/11 09/15/11 09/20/11 09/22/11 09/27/11 09/29/11 10/04/11 10/06/11 10/11/11 10/13/11 10/18/11 10/20/11 10/25/11 10/27/11 11/01/11 11/03/11 11/08/11 Topic Class Introduction Investments: background and issues Financial securities Financial securities Securities markets Securities markets Bond prices and yields Bond prices and yields Bond prices and yields Mutual fund and other investment companies Follow Monday 's schedule (no class) Mutual fund and other investment companies Wrap up and Review Exam 1 Risk and Return Risk and Return Efficient diversification Efficient diversification CAPM and APT 1, 2, 3, 4, 9 5 5 6 6 7 HW 4 due Excel case 1 due 4 HW 3 due Chapter Homework and Excel cases (required)

Historically, people invest their money in mutual funds as a means to generate extra income. This can be separated into either stocks or bonds, with each having their specialty in a portfolio. The following report provides an analysis of two funds, the Fidelity® Nasdaq® Composite Index Fund (FNCMX) and the Fidelity® Floating Rate High Income Fund (FFRHX). The analysis of the yearly returns of each fund from 2005-2014 will include the risk and return for investing in each with key statistics such as mean, median, standard deviation, and range for indicators of their performance. These statistics will be paired with visuals so the client can have a visual representation of what they look like. The analysis will also compare the performance

§  Investment Performance is a complicated subject §  Theoretically correct measures are difficult to construct §  Different statistics or measures are appropriate for different types of investment decisions or portfolios §  Many industry and academic measures are different §  The nature of active management leads to measurement problems

investment portfolio of several assets. The benefits of diversification were first formalized in 1952 by

This report aims at implement two distinct approaches, which can indicate the expected return and risk of a two-stock portfolio, to generate a practical solution to risk-analyzing for stock-investing. The two approaches are Mean-Variance Approach and CAPM Approach. While we apply the Mean-Variance Approach to determine the expected return and standard deviation, we employ the CAPM approach to measure the beta and expected return of each stock. The calculations of the aforesaid mathematical characteristics will contain the weekly returns during a seven-year time period integrated with the ASX all ordinaries Accumulation Index as a substitute for the market index and Official Cash Rate (thereafter, OCR, which is the interest

Our investment approach is primarily focused around creating a portfolio with a relatively low risk level. Our portfolio will be diversified in a variety of investments in order to reduce the overall risk of the portfolio. We believe that diversification is an excellent way to build a portfolio that will increase the chances of a return and minimize the chances of a significant loss. Due to an increase in globalization, economies around the world are interacting with each other more than ever, causing the economies to be heavily influenced by each other. Due to the increased globalization and the uncertainty that surrounds the future, we prefer creating a long-term portfolio with a relatively low risk level.

Portfolio expected returns are a weighted average of the expected returns of the constituent investments. If the two investments are A and B, with a being invested in A and (1-a) in B, then

First, the equally weighted portfolio is the simplest portfolio construction approach that gives all assets same weights (Lee, 2011). Lee described the portfolio as the most heuristic portfolio because it completely ignores the return and risk relationship of investments. Lee also argued that equal weighting of assets does not guarantee diversification since this strategy does not have any consideration of correlation among assets. This is the complete and undeniable truth. As we have learned from the investment and financial theory courses, some of assets have close relationship that can be estimated by covariance between assets.

approach to portfolio matrix analysis is needed. This new approach must take in consideration all the

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 be based on the Constructing and Managing a Portfolio Simulation that details the fundamentals of portfolio construction in relation to the risk-return tradeoff and the relationship

“Traditional Investment Appraisal techniques cannot cope with the fast changing environment in manufacturing industry today”