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Case from journal
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Reference no. JIACS11-01-02
Authors: Malek Lashgari
Published by: Allied Business Academies
Published in: "Journal of the International Academy for Case Studies", 2005

Abstract

Portfolio management, while still an art, has greatly benefited from recent developments in financial theory. The fruits of empirical evidence provide a useful tool to both active and passive money managers. For example, small investors may be able to obtain a reasonable return on investment, in a cost efficient manner, by investing in an index fund. Investors with more capital may benefit from active security selection, such as investments in value and growth stocks. This case provides two simple designs, employing both active and passive strategies, for managing small and medium size retirement portfolios. It also utilizes a number of tools developed in modern portfolio theory to provide an estimation of portfolio return and risk. While the utmost important criterion for measuring performance is reaching desired goals, a risk adjusted measure of performance is also provided. The primary subject matter of this case is to demonstrate an application of modern portfolio theory in construction and measurement of performance of an investment portfolio. The secondary subject matter concerns issues in performance presentation standards.
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Abstract

Portfolio management, while still an art, has greatly benefited from recent developments in financial theory. The fruits of empirical evidence provide a useful tool to both active and passive money managers. For example, small investors may be able to obtain a reasonable return on investment, in a cost efficient manner, by investing in an index fund. Investors with more capital may benefit from active security selection, such as investments in value and growth stocks. This case provides two simple designs, employing both active and passive strategies, for managing small and medium size retirement portfolios. It also utilizes a number of tools developed in modern portfolio theory to provide an estimation of portfolio return and risk. While the utmost important criterion for measuring performance is reaching desired goals, a risk adjusted measure of performance is also provided. The primary subject matter of this case is to demonstrate an application of modern portfolio theory in construction and measurement of performance of an investment portfolio. The secondary subject matter concerns issues in performance presentation standards.

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