Introduction
This report is aim to analyse the benefits of risk-adjusted performance measurements to Zeus Asset Management. Zeus Asset Management is a fund management firm founded in 1968 in Atlanta by Tir Jerry Schneider. It serves both institutional and individual investors and with more than $1.7 million assets under management. The director of research, John Abbot, is considering adopting risk-adjusted approach in performance assessment.
Zeus’s competitiveness analysis
Zeus’s main competitors are the mutual funds in particular market. Compared with those competitors, Zeus has strong competitive advantages.
Firstly, different from many managed funds of actively trading, Zeus’s investment philosophy is based on the belief that
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Absolute measures usually includes the holding period return (HPR) and the present value of future return. Absolute measurements are easy to calculate and reflect the earning ability of a portfolio. However, they do not capture the risks associated with the investment portfolios. Investors may be misled if only looking at those measurements since one high-return portfolio may have high risks and do not match with their risk tolerance.
The simplest and most popular way to adjust returns for risk is to compare the portfolio’s return with the returns on a comparison universe, which is often called relative measurements. It is calculated by comparing the HPR to that of a benchmark, which can be either an index or a similar company figure. It is simple to use but choosing the appropriate benchmark is also crucial as different benchmark will lead to totally different results and hence affect the investment decisions.
Risk-adjusted return measurements
Risk-adjusted return measurements are usually considered superior than absolute measurements since they take the risks into consideration. Specific methods of adjusting the returns for risks include the Sharpe Ratio, Treynor Ratio, Jensen’s Alpha, beta, and information ratio.
Sharpe Ratio measures the portfolio risk premium for each unit of total risk. It is calculated using the formula: . It is simple to calculate and can be used to compare portfolios with different risks.
Zeus was given the power of thunder and lightning by the Cyclops to help defeat defeat his father in war with the Titans (Nelson 1). This symbol also acted as a threat in some cases. Zeus had to discipline all the gods and goddesses, and the lightning bolt showed punishments were on their way if someone broke a law. His lightning bolt did amazing things for Greek mythology, and is the most powerful symbol he had in my eyes. Along with the lightning bolt, he had other cool tricks and abilities the he could do.
Despite the fact that Zeus was the highest of all the Greek gods, he was still one among many. God is a single, omnipotent, being that is the leader of the universe. Although they differ in that sense, they are both the highest of the gods in their states. Zeus, like the Christian God, expect good from all and want “their people” to obey their laws and orders. But unlike God, Zeus is not very accepting and although he expects good from all, he sees good in
The Yale Endowment is known in the financial industry as a pioneer in using a combination of innovative asset allocation and active management to produce impressive long-term performance. In fact, the Endowment produced a 17.8% average annual return, net of fees, in the ten-year period ending June 30, 2007.1 This performance is particularly impressive given that, in recent years, the Endowment portfolio has carried less than a 40% weighting in equities. Instead, under the leadership of Chief Investment Officer Dave Swensen, the Yale Investments Office
“The Benefits of diversification are clear. Portfolio theory has played a crucial role in explaining the relationship between risk and return where more than one investment is held. It also enables us to identify optimal and efficient portfolios.”
I. Rate of Return on Total Assets: Measures the company’s profitability relative to total assets. A percentage increment for Company G, from 12.30% to 13.68% (2011-12) keeps them above industry benchmarks (8.60% and 12.30%). Rate of Return on Total Assets represents strength for Company G.
The prices of stocks are taken on daily basis and daily returns are calculated from it. The daily variances between these returns come out and the value at risk calculated from it with the percentile is applied on it. The value at risk tells you about the riskiness a price has on a portfolio. The positive outcome of this approach is the simplicity in implementation. The benefits of this method are its simplicity to implement and its negative aspect is that it requires a large amount of data for calculation which is extensive to calculate.
Harry Markowitz 1991, developed a theory of “Portfolio choice”, that allows the investors to examine the risk as per the expected returns. In modern World, this theory is known as Modern portfolio theory (MPT). It attempts to attain the best portfolio expected return for a predefined portfolio risk, or to minimise the risk for the predefined expected returns, by a careful choice of assets. Though it’s a widely used theory, still has been challenged widely. The critics question the feasibility of theory as a strategy for
So both of them are talking about how Zeus could become a god, but neither one of them enjoys any of the ideas that come out of their mouths. Then, they get into an argument with each other about who is the worthiest brother. Since Zeus gets so angry at his brother he picks up a stick from outside and throws it as hard as he can at Hades, but misses and the stick turns into a lightning bolt. Being shocked at what just happened, Zeus questions himself being a god. Because Zeus didn’t know that that was going to happen, his brother believes
To begin, Zeus was seen as one of the major gods, if not the most supreme god of his time. This could have affected the Greeks interpretations of his actions. Zeus was seen as the “glorified image not only of husband
In Ancient Greece, many people worshiped Zeus, whom they believed to be the most powerful god. However, since the genesis of the world, men have worshipped Jehovah, the Almighty God of the Bible. “Seth also had a son, and he named him Enosh. At that time people began to call on the name of the LORD.” (Genesis 4:26 NIV).
Greeks associated Zeus with justice and well being. He's believed to have greatly punished the wicked and maldoers and rewarded all that did good.
Zeus was a carefree god who loved to laugh. He was said to be wise, fair and just. He was also very unpredictable. He was also easily angered which could be very destructive. He has previously hurled lightning bolts and caused violent storms that wreaked chaos on earth.
Zeus was one of the greatest Gods known to man. He has influenced many of those around him, especially the other Gods and Goddesses. Zeus is the most important God out of all the Gods. He is the God of all Gods in Greek Mythology. He is also the sky and weather God, but is mainly the God of all the Gods. All of the other Gods look up to him and want to be who he is.
CAPM results can be compared to the best expected rate of return that investor can possibly earn in other investments with similar risks, which is the cost of capital. Under the CAPM, the market portfolio is a well-diversified, efficient portfolio representing the non-diversifiable risk in the economy. Therefore, investments have similar risk if they have the same sensitivity to market risk, as measured by their beta with the market portfolio.
The above graph is used to represent a high and a low risk investment. As it describes, a high-risk investment may at first seem to be a very bad investment, but will become a high return investment after a short time. However, for a low risk investment, there will also be positive returns, but not so significant, as those of a high-risk investment.