Calculated Absolute and Relative VaR using Varcov Approatch, Parametric with EWMA-estimated volatility, Historical Simulation and Filtered Historical Simulation.
Global Value Equity Portfolio (March 2011)Trading Floor
This month we have adjusted our Global Value Equity Portfolio to include the reinvestment of gross dividends and introduced dynamic weights for the constituents. This reduces transaction costs, enhances excess return and makes the portfolio easier to replicate for investors.
In All About Factors, we cover the basics of what factors are, where we expect them to derive their excess returns from, their advantages and disadvantages and if there is indeed any merit to this approach or if it just another Wall Street marketing gimmick.
After covering the commonly accepted factors basics, we discuss expectations for factor investing, the theory as to why short-term pain must be present for long-term return, and some key considerations in moving from the academic research to creating investible portfolios.
Also explored is the current on-going debate between industry titans Rob Arnott (Research Affiliates) and Cliff Asness (AQR) as to the efficacy of using valuation-based spreads to time factor exposures.
Lastly, we look at some different methods that a retail investor can utilize smart-beta investing, by highlighting some of the current industry techniques for diversifying factor exposures and building a multi-factor portfolio.
Book presentation: Excess Returns: a comparative study of the methods of the ...Frederik Vanhaverbeke
This is a pdf presentation of the book Excess Returns: a comparative study of the methods of the world's greatest investors. The presentation explains the various topics that are discussed in the book and show plenty of practical examples to understand the main points. It challenges the Efficient Market Hypothesis by showing some extraordinary track records in the investment world. It explains where top investors look for bargains. It shows how they perform a due diligence and how they value stocks. A separate section is devoted to the way top investors buy and sell various types of stocks, and how they buy and sell over stock market cycles. It also explains the various psychological aspects that top investors deem essential to beat the market.
The document presents research on the relationship between risk and return as measured by beta. It summarizes previous studies that found high beta stocks yield higher returns in up markets but lower returns in down markets. The author's own research analyzed global stock returns from 1995-2015 and found that investing in the lowest beta deciles generated higher returns than higher beta deciles, even when adjusted for risk. Additionally, high beta stocks tended to revert to a beta of around 1.1x while low beta stocks reverted to around 0.7x. Therefore, the research concludes that high risk does not necessarily mean high return.
The S&P Persistence Scorecard seeks to analyze whether past mutual fund performance is indicative of future performance. It tracks the consistency of top performers over consecutive periods and measures performance persistence through transition matrices. The key findings are that very few funds consistently repeat top-half or top-quartile performance over consecutive periods. Additionally, screening for only top-quartile funds may be inappropriate as a healthy number of future top performers come from the second and third quartiles in prior periods. The bottom quartile funds have a high probability of being merged or liquidated and screening these out may be reasonable.
The document discusses trend analysis and ratio analysis techniques of financial statement analysis. It provides definitions and formulas for trend analysis, including calculating trend percentages by dividing figures in other years by a base year. It also discusses advantages and limitations of trend analysis. Ratio analysis is then introduced, including different types of ratios and their uses in analyzing profitability, liquidity, solvency, operating efficiency and risk. Objectives and advantages of ratio analysis are outlined. Common limitations of ratio analysis are also presented.
The document discusses techniques of financial statement analysis, specifically trend analysis and ratio analysis. It provides an overview of trend analysis, including how to calculate trend percentages, advantages and limitations. It also outlines different types of ratios, categories of ratios, and objectives and advantages of ratio analysis, such as simplifying data, comparative analysis between periods and companies, locating weaknesses, and effective management control.
Analysis and Interpretation of Financial Statement as a Managerial Tool for D...ijtsrd
Financial statement analysis and interpretation is a completely vital tool of exact control choice making is enterprise employer. Good decision ensures commercial enterprise survival, profitability and increase. Without financial announcement evaluation in investment choices, a company is probably to make decisions that may spell its doom. Poor or loss of qualitative financial announcement evaluation could result in funding returns, low profitability or even incapability to identify feasible funding possibilities the principle goal of this challenge is therefore, became to decide how corporations should use economic statement evaluation and interpretation to resource management choice and to avoid the troubles highlighted above primary and secondary records are employee to develop the scope of this have a look at. Organizational profitability has courting with monetary declaration evaluation and interpretation based management selection however not drastically appreciably. Proper use of monetary announcement evaluation must be made now not only in funding but additionally in different regions of selection making. Prof. H Bhaskar Shetty | Pooja Kumari U "Analysis and Interpretation of Financial Statement as a Managerial Tool for Decision Making" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd23962.pdfPaper URL: https://www.ijtsrd.com/management/accounting-and-finance/23962/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making/prof-h-bhaskar-shetty
Global Value Equity Portfolio (March 2011)Trading Floor
This month we have adjusted our Global Value Equity Portfolio to include the reinvestment of gross dividends and introduced dynamic weights for the constituents. This reduces transaction costs, enhances excess return and makes the portfolio easier to replicate for investors.
In All About Factors, we cover the basics of what factors are, where we expect them to derive their excess returns from, their advantages and disadvantages and if there is indeed any merit to this approach or if it just another Wall Street marketing gimmick.
After covering the commonly accepted factors basics, we discuss expectations for factor investing, the theory as to why short-term pain must be present for long-term return, and some key considerations in moving from the academic research to creating investible portfolios.
Also explored is the current on-going debate between industry titans Rob Arnott (Research Affiliates) and Cliff Asness (AQR) as to the efficacy of using valuation-based spreads to time factor exposures.
Lastly, we look at some different methods that a retail investor can utilize smart-beta investing, by highlighting some of the current industry techniques for diversifying factor exposures and building a multi-factor portfolio.
Book presentation: Excess Returns: a comparative study of the methods of the ...Frederik Vanhaverbeke
This is a pdf presentation of the book Excess Returns: a comparative study of the methods of the world's greatest investors. The presentation explains the various topics that are discussed in the book and show plenty of practical examples to understand the main points. It challenges the Efficient Market Hypothesis by showing some extraordinary track records in the investment world. It explains where top investors look for bargains. It shows how they perform a due diligence and how they value stocks. A separate section is devoted to the way top investors buy and sell various types of stocks, and how they buy and sell over stock market cycles. It also explains the various psychological aspects that top investors deem essential to beat the market.
The document presents research on the relationship between risk and return as measured by beta. It summarizes previous studies that found high beta stocks yield higher returns in up markets but lower returns in down markets. The author's own research analyzed global stock returns from 1995-2015 and found that investing in the lowest beta deciles generated higher returns than higher beta deciles, even when adjusted for risk. Additionally, high beta stocks tended to revert to a beta of around 1.1x while low beta stocks reverted to around 0.7x. Therefore, the research concludes that high risk does not necessarily mean high return.
The S&P Persistence Scorecard seeks to analyze whether past mutual fund performance is indicative of future performance. It tracks the consistency of top performers over consecutive periods and measures performance persistence through transition matrices. The key findings are that very few funds consistently repeat top-half or top-quartile performance over consecutive periods. Additionally, screening for only top-quartile funds may be inappropriate as a healthy number of future top performers come from the second and third quartiles in prior periods. The bottom quartile funds have a high probability of being merged or liquidated and screening these out may be reasonable.
The document discusses trend analysis and ratio analysis techniques of financial statement analysis. It provides definitions and formulas for trend analysis, including calculating trend percentages by dividing figures in other years by a base year. It also discusses advantages and limitations of trend analysis. Ratio analysis is then introduced, including different types of ratios and their uses in analyzing profitability, liquidity, solvency, operating efficiency and risk. Objectives and advantages of ratio analysis are outlined. Common limitations of ratio analysis are also presented.
The document discusses techniques of financial statement analysis, specifically trend analysis and ratio analysis. It provides an overview of trend analysis, including how to calculate trend percentages, advantages and limitations. It also outlines different types of ratios, categories of ratios, and objectives and advantages of ratio analysis, such as simplifying data, comparative analysis between periods and companies, locating weaknesses, and effective management control.
Analysis and Interpretation of Financial Statement as a Managerial Tool for D...ijtsrd
Financial statement analysis and interpretation is a completely vital tool of exact control choice making is enterprise employer. Good decision ensures commercial enterprise survival, profitability and increase. Without financial announcement evaluation in investment choices, a company is probably to make decisions that may spell its doom. Poor or loss of qualitative financial announcement evaluation could result in funding returns, low profitability or even incapability to identify feasible funding possibilities the principle goal of this challenge is therefore, became to decide how corporations should use economic statement evaluation and interpretation to resource management choice and to avoid the troubles highlighted above primary and secondary records are employee to develop the scope of this have a look at. Organizational profitability has courting with monetary declaration evaluation and interpretation based management selection however not drastically appreciably. Proper use of monetary announcement evaluation must be made now not only in funding but additionally in different regions of selection making. Prof. H Bhaskar Shetty | Pooja Kumari U "Analysis and Interpretation of Financial Statement as a Managerial Tool for Decision Making" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd23962.pdfPaper URL: https://www.ijtsrd.com/management/accounting-and-finance/23962/analysis-and-interpretation-of-financial-statement-as-a-managerial-tool-for-decision-making/prof-h-bhaskar-shetty
ASX Share Research What Drives Australian Share Out Performance? LVXResearch.comlvxresearch
What Drives Company Stock Price Out Performance? What Fundamental Stock Investment Strategies Have Been Working Consistently? What Ranked Metrics Have Historically Signalled Stock Prices Will Outperform?
Our Paid Monthly Research Service on the Australian (ASX) and Hong Kong Markets (HSE) Answers all these Questions in a Digestible way for all levels of Investors: www.lvxresearch.com
Sign up for our free market update on the drivers that have historically signalled a change in stock market direction.
Subscribe to our Monthly research at www.lvxresearch.com
FUNDAMENTAL ANALYSIS WITH SPECIAL REFERENCE TO PHARMACEUTICAL COMPANIES LISTE...IAEME Publication
An investment analysis is essential for the benefit of risk reduction and maximizes the gain. The investment analysis on stock market has two main approaches namely technical analysis and fundamental analysis. This study is focused on fundamental analysis of pharmaceutical companies listed in National Stock Exchange (NSE), which include selected five companies for a period of five years from 2011 to 2015. The fundamental analysis consists of three parts such as economic analysis, industry analysis and company analysis. The economic analysis consists of economic indicators which influence the security market like GDP, inflation, interest rate, foreign reserves, export and agricultural production for the study period.
Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Inde...Wasim Uddin
The objective of the current study is to investigate the stock return’s predictability by using financial ratios and control variable of PSX 100 Index companies during period from 2001-2014.
The document discusses differences between academic and practitioner research in empirical finance. It notes that academics aim to publish and contribute to knowledge, while practitioners aim to improve returns and demonstrate thought leadership. Both should use rigorous methods and avoid biases. However, academics often make "errors" such as simplistic portfolio construction, not considering risk controls or investable universes, using long-short strategies that are hard to implement, and only reporting average full-period returns rather than sub-period performance. The document advocates for research to be more implementable for real-world investors.
Forecasting Economic Activity using Asset PricesPanos Kouvelis
This dissertation evaluates how well the asset prices and, in particular the term spread, the short rate and the real stock returns, forecast the GDP growth and the Industrial Production. The study is applied with data of seven countries (Canada, France, Germany, Italy, Japan, United Kingdom and United States) and it covers a period of time between 1966 until now. The research finds that the asset prices have forecasting power for one quarter/month but they lose their power when the forecasting horizon increases. Moreover, the paper evaluates that the real stock return is the best predictor of the GDP growth and that the short rate has more predictive content than the term spread.
Keywords: Term spread, short rate, stock returns, output growth, forecasting horizon, out-of-sample statistics
Establishing a Forecasting Model for High Speed Diesel for Bangladesh: A Case...hasnat1983
The research emphasizes on establishing a forecasting model for High Speed Diesel (HSD) for Bangladesh; aiming that the study collected data from Meghna Petroleum Limited to analyze the data pattern of HSD sales. During scrupulous revise the research identified and classified data pattern of HSD sales by various graphs. Following to the classification the study prepares forecasting system using Classical Decomposition Model which is a combination of trend and seasonality forecasting. The study tests the accuracy level of the model using two different methods and results are satisfactory. The paper identifies the sectors that can use the forecast to enhance the management system. This research divulge a set of recommendations for Meghna petroleum limited as well as for the similar organizations who are working in this area to perform smoothly and help the Government to reduce the subsidy level in fuel sector.
Visualizing the Effects of Holding Period and Data Window on Calculations of ...Ralph Goldsticker
This presentation shows how to use Cumulative Contribution Charts to visualize the relationships between investment horizon and volatility and the behavior of volatilities and correlations through time. With that information the researcher can select the sampling period and window that reflects the investment horizon and expected market environment.
This document summarizes a research article that investigates the relationships between accruals and management earnings forecast errors and revisions in Japan. The study finds:
1) A positive relationship between accruals and initial management earnings forecast errors, suggesting forecasts are based on accounting information rather than economic information.
2) A weak relationship between accruals and final management earnings forecast errors, as forecasts are revised based on economic analysis.
3) A negative relationship between accruals and forecast revisions, as revisions mitigate the effects of errors from systematic accrual processes.
4) Relationships between accruals and forecast errors/revisions are more pronounced for firms operating in uncertain environments or having difficulty analyzing economic information.
This document discusses efficient portfolio construction. It begins by outlining the objectives of constructing a diversified portfolio to maximize returns while minimizing risks. It then describes the 8 steps to calculate portfolio weights using different methods, including maximizing returns for a given risk and minimizing risk for a given return with and without allowing short selling. The document provides background on portfolio management and selection criteria for sectors and shares to include in the efficient portfolio. The goal is to select stocks that optimize the portfolio's excess return per unit of risk.
This document provides an overview of fundamental analysis and its application to analyzing pharmaceutical companies in India. It defines fundamental analysis as examining qualitative and quantitative company-specific factors to determine a security's intrinsic value. The document outlines the key components of fundamental analysis, including economy, industry, company, and financial analysis. It then provides examples of ratio analyses for several major Indian pharmaceutical companies (Sun Pharma, Dr. Reddys, Lupin, Cipla, Ranbaxy) to compare their profitability, liquidity, and other metrics. Based on this analysis, Sun Pharma and Dr. Reddys appear to have the most favorable ratios, suggesting they may be good investment opportunities compared to the other companies.
Arbitrage pricing and investment performance in the Nigerian capital market ...Newman Enyioko
This document summarizes a research paper that applied the Arbitrage Pricing Theory to examine the relationship between investment performance and macroeconomic variables in the Nigerian capital market from 1988 to 2017. The paper used data from five quoted companies to test if inflation, interest rates, exchange rates, money supply, GDP, and treasury bill rates explained investment performance, as measured by earnings per share. The results found that the selected macroeconomic factors did not strongly explain investment performance in the Nigerian capital market, contrary to the objectives of the Arbitrage Pricing Theory. The paper recommends policies to manage market realities and ensure stability to improve investment performance.
Emerging markets such as India provide the investors with returns far greater
than those in developed markets; taking the average returns from the period 1995 to
2014 the returns are 4.714% to 3.276% of the developed market (US not included).
Majority of emerging markets commenced joining with the capital market of the
world, thus allowing huge inflow of capital which in turn paved the path for economic
growth. Even though the emerging markets provide high returns these may also be an
indication of a bubble formation. Detection of a bubble is a tedious task primarily due
to the fundamental value of the security being uncertain, the randomness of the
fundamentals of the market make detecting bubbles an arduous task. Ratios that
foretold the financial crisis of 2007- Market Capitalization to GDP (Buffet Indicator),
Price to Earnings Ratio (PE Ratio), Price to Book Value (PB Ratio), Tobin’s Q. Data
is collected from the 1999-2000 from various Indian indices such as NIFTY 50, NIFTY
NEXT 50, NIFTY BANK, NIFTY 500 S&P BSE SENSEX, S&P BSE 100. The paper
utilizes the ratios mentioned above to detect and back track various bubble episodes in
the Indian market; methodology used is the Philips et al (2015) right tailed unit test.
The paper is also inclined to take steps to mitigate the effects of bubble by amending
the financial policies and the monetary liquidity of the financial system.
This document summarizes a statistical arbitrage strategy that evaluates mean reversion in stock prices over time. It describes the strategy's assumptions that stock prices temporarily diverge from their equilibrium relative to the market before reverting. The experiment uses S&P 500 stock data to calculate daily returns, correlations, betas and residuals over rolling 60-day windows. When residuals exceed +/-2 standard deviations, positions are taken assuming reversion will occur. While backtested returns are appealing, live trading realities like transaction costs and limited share availability would likely reduce profits versus this theoretical analysis.
This document describes research on designing enhanced exchange traded funds (ETFs) that incorporate social media sentiment data from Twitter. The researchers use Twitter sentiment scores (S-Scores) from Social Market Analytics to strategically rebalance portions of existing ETFs tracking the S&P 500 (SPY), health care sector (XLV), and consumer discretionary sector (XLY). Backtesting of rebalancing the highest market capitalization stocks in the ETFs based on dynamic confidence intervals of S-Scores shows the sentiment-enhanced ETFs yield better returns than the original benchmarks.
This document is a capstone project report analyzing the Australia grocery market which is dominated by Woolworth and Coles with over 60% combined market share. The report includes an introduction outlining the research topic and background. It then provides a literature review on relevant anti-combination laws, the effects of monopoly, and risk analysis. The report also describes the data collection and analysis methodology to be used. It will analyze factors related to the grocery industry and identify hypotheses about whether the current monopoly is optimal for the Australian market and consumers. The conclusion will forecast if other competitors could become major players by utilizing appropriate short- and long-term strategies.
A Study on Stock’s Volatility in Banking Sector using Technical AnalysisIRJET Journal
This document discusses a study on analyzing the volatility of stocks in the Indian banking sector using technical analysis tools. It aims to determine which banks perform better based on price fluctuations. The study uses tools like Bollinger bands and Relative Strength Index (RSI) to analyze weekly share price movements of six banks (Allahabad Bank, Bank of India, Oriental Bank of Commerce, Vijaya Bank, Corporation Bank, and Canara Bank) over three years. The results show that Canara Bank and Vijaya Bank exhibited the highest volatility and returns compared to other banks during the period. The analysis of technical indicators can help investors identify optimal times to buy and sell bank stocks and predict market movements.
The document outlines the agenda and overview for the Winter 2010 Stock Analyst Program. It discusses topics that will be covered each week, including macroeconomic analysis, industry analysis, stock valuation methodology, and important financial ratios. Resources for conducting equity research such as relevant websites, Bloomberg functions, and company filings are also provided.
2012 what are the performance drivers of the global managed volatilityFrederic Jamet
1) The Global Managed Volatility strategy has outperformed the market index over the past 13 years while significantly reducing risk, as measured by volatility.
2) The strategy's outperformance is driven by its low exposure to the underperforming market factor during this period, as well as positive exposure to the value and small-cap factors.
3) Exposure to value stocks can be attributed to these stocks' neglected nature and de-correlated behavior, while exposure to small-caps comes from their greater number leading to more frequent selection in a non-market cap weighted strategy. The strategy's performance is diversified across multiple factors rather than relying solely on volatility reduction.
Skills for Prosperity? A review of OECD and Partner Country Skill StrategiesWesley Schwalje
The Centre for Learning and Life Chances in Knowledge Economies and Societies at the Institute of Education, University of London cited Tahseen Consulting's research on the governance of skills formation in knowledge-based economies as a potential model for more effective national education and skills formation strategies.
The document provides an overview of various topics to be covered in a stock analyst program, including portfolio performance, equity analysis techniques, macroeconomic analysis, valuation methodologies, investment styles, and key financial ratios. It discusses approaches like discounted cash flow valuation, comparable companies analysis, and precedent transactions. It also covers different investment strategies such as value investing, growth investing, and contrarian investing.
2017 Supply Chains to Admire - 13 JUN 2017 reportLora Cecere
The Supply Chains to Admire™ analysis is an annual study of supply chain excellence. Now in its fourth year of development, the focus of this research is to better understand supply chain performance and improvement of 494 publicly held companies in 31 peer groups for the period of 2010-2016. At the 2017 Supply Chain Insights Global Summit, winners from the analysis will share insights on driving supply chain excellence.
A study on financial performance analysis at cee veeAKHILHARIDAS
This document provides an overview of the global and Indian footwear industry. It discusses the history of footwear dating back to ancient civilizations. India has a large livestock population and is one of the largest producers and exporters of footwear globally, especially leather footwear. The key products exported are leather footwear, footwear components, leather garments, and leather goods. The footwear industry is concentrated in certain regions and states of India like Tamil Nadu, Delhi, Agra and Kanpur. The document also provides statistics on India's annual footwear production capacity and imports.
ASX Share Research What Drives Australian Share Out Performance? LVXResearch.comlvxresearch
What Drives Company Stock Price Out Performance? What Fundamental Stock Investment Strategies Have Been Working Consistently? What Ranked Metrics Have Historically Signalled Stock Prices Will Outperform?
Our Paid Monthly Research Service on the Australian (ASX) and Hong Kong Markets (HSE) Answers all these Questions in a Digestible way for all levels of Investors: www.lvxresearch.com
Sign up for our free market update on the drivers that have historically signalled a change in stock market direction.
Subscribe to our Monthly research at www.lvxresearch.com
FUNDAMENTAL ANALYSIS WITH SPECIAL REFERENCE TO PHARMACEUTICAL COMPANIES LISTE...IAEME Publication
An investment analysis is essential for the benefit of risk reduction and maximizes the gain. The investment analysis on stock market has two main approaches namely technical analysis and fundamental analysis. This study is focused on fundamental analysis of pharmaceutical companies listed in National Stock Exchange (NSE), which include selected five companies for a period of five years from 2011 to 2015. The fundamental analysis consists of three parts such as economic analysis, industry analysis and company analysis. The economic analysis consists of economic indicators which influence the security market like GDP, inflation, interest rate, foreign reserves, export and agricultural production for the study period.
Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Inde...Wasim Uddin
The objective of the current study is to investigate the stock return’s predictability by using financial ratios and control variable of PSX 100 Index companies during period from 2001-2014.
The document discusses differences between academic and practitioner research in empirical finance. It notes that academics aim to publish and contribute to knowledge, while practitioners aim to improve returns and demonstrate thought leadership. Both should use rigorous methods and avoid biases. However, academics often make "errors" such as simplistic portfolio construction, not considering risk controls or investable universes, using long-short strategies that are hard to implement, and only reporting average full-period returns rather than sub-period performance. The document advocates for research to be more implementable for real-world investors.
Forecasting Economic Activity using Asset PricesPanos Kouvelis
This dissertation evaluates how well the asset prices and, in particular the term spread, the short rate and the real stock returns, forecast the GDP growth and the Industrial Production. The study is applied with data of seven countries (Canada, France, Germany, Italy, Japan, United Kingdom and United States) and it covers a period of time between 1966 until now. The research finds that the asset prices have forecasting power for one quarter/month but they lose their power when the forecasting horizon increases. Moreover, the paper evaluates that the real stock return is the best predictor of the GDP growth and that the short rate has more predictive content than the term spread.
Keywords: Term spread, short rate, stock returns, output growth, forecasting horizon, out-of-sample statistics
Establishing a Forecasting Model for High Speed Diesel for Bangladesh: A Case...hasnat1983
The research emphasizes on establishing a forecasting model for High Speed Diesel (HSD) for Bangladesh; aiming that the study collected data from Meghna Petroleum Limited to analyze the data pattern of HSD sales. During scrupulous revise the research identified and classified data pattern of HSD sales by various graphs. Following to the classification the study prepares forecasting system using Classical Decomposition Model which is a combination of trend and seasonality forecasting. The study tests the accuracy level of the model using two different methods and results are satisfactory. The paper identifies the sectors that can use the forecast to enhance the management system. This research divulge a set of recommendations for Meghna petroleum limited as well as for the similar organizations who are working in this area to perform smoothly and help the Government to reduce the subsidy level in fuel sector.
Visualizing the Effects of Holding Period and Data Window on Calculations of ...Ralph Goldsticker
This presentation shows how to use Cumulative Contribution Charts to visualize the relationships between investment horizon and volatility and the behavior of volatilities and correlations through time. With that information the researcher can select the sampling period and window that reflects the investment horizon and expected market environment.
This document summarizes a research article that investigates the relationships between accruals and management earnings forecast errors and revisions in Japan. The study finds:
1) A positive relationship between accruals and initial management earnings forecast errors, suggesting forecasts are based on accounting information rather than economic information.
2) A weak relationship between accruals and final management earnings forecast errors, as forecasts are revised based on economic analysis.
3) A negative relationship between accruals and forecast revisions, as revisions mitigate the effects of errors from systematic accrual processes.
4) Relationships between accruals and forecast errors/revisions are more pronounced for firms operating in uncertain environments or having difficulty analyzing economic information.
This document discusses efficient portfolio construction. It begins by outlining the objectives of constructing a diversified portfolio to maximize returns while minimizing risks. It then describes the 8 steps to calculate portfolio weights using different methods, including maximizing returns for a given risk and minimizing risk for a given return with and without allowing short selling. The document provides background on portfolio management and selection criteria for sectors and shares to include in the efficient portfolio. The goal is to select stocks that optimize the portfolio's excess return per unit of risk.
This document provides an overview of fundamental analysis and its application to analyzing pharmaceutical companies in India. It defines fundamental analysis as examining qualitative and quantitative company-specific factors to determine a security's intrinsic value. The document outlines the key components of fundamental analysis, including economy, industry, company, and financial analysis. It then provides examples of ratio analyses for several major Indian pharmaceutical companies (Sun Pharma, Dr. Reddys, Lupin, Cipla, Ranbaxy) to compare their profitability, liquidity, and other metrics. Based on this analysis, Sun Pharma and Dr. Reddys appear to have the most favorable ratios, suggesting they may be good investment opportunities compared to the other companies.
Arbitrage pricing and investment performance in the Nigerian capital market ...Newman Enyioko
This document summarizes a research paper that applied the Arbitrage Pricing Theory to examine the relationship between investment performance and macroeconomic variables in the Nigerian capital market from 1988 to 2017. The paper used data from five quoted companies to test if inflation, interest rates, exchange rates, money supply, GDP, and treasury bill rates explained investment performance, as measured by earnings per share. The results found that the selected macroeconomic factors did not strongly explain investment performance in the Nigerian capital market, contrary to the objectives of the Arbitrage Pricing Theory. The paper recommends policies to manage market realities and ensure stability to improve investment performance.
Emerging markets such as India provide the investors with returns far greater
than those in developed markets; taking the average returns from the period 1995 to
2014 the returns are 4.714% to 3.276% of the developed market (US not included).
Majority of emerging markets commenced joining with the capital market of the
world, thus allowing huge inflow of capital which in turn paved the path for economic
growth. Even though the emerging markets provide high returns these may also be an
indication of a bubble formation. Detection of a bubble is a tedious task primarily due
to the fundamental value of the security being uncertain, the randomness of the
fundamentals of the market make detecting bubbles an arduous task. Ratios that
foretold the financial crisis of 2007- Market Capitalization to GDP (Buffet Indicator),
Price to Earnings Ratio (PE Ratio), Price to Book Value (PB Ratio), Tobin’s Q. Data
is collected from the 1999-2000 from various Indian indices such as NIFTY 50, NIFTY
NEXT 50, NIFTY BANK, NIFTY 500 S&P BSE SENSEX, S&P BSE 100. The paper
utilizes the ratios mentioned above to detect and back track various bubble episodes in
the Indian market; methodology used is the Philips et al (2015) right tailed unit test.
The paper is also inclined to take steps to mitigate the effects of bubble by amending
the financial policies and the monetary liquidity of the financial system.
This document summarizes a statistical arbitrage strategy that evaluates mean reversion in stock prices over time. It describes the strategy's assumptions that stock prices temporarily diverge from their equilibrium relative to the market before reverting. The experiment uses S&P 500 stock data to calculate daily returns, correlations, betas and residuals over rolling 60-day windows. When residuals exceed +/-2 standard deviations, positions are taken assuming reversion will occur. While backtested returns are appealing, live trading realities like transaction costs and limited share availability would likely reduce profits versus this theoretical analysis.
This document describes research on designing enhanced exchange traded funds (ETFs) that incorporate social media sentiment data from Twitter. The researchers use Twitter sentiment scores (S-Scores) from Social Market Analytics to strategically rebalance portions of existing ETFs tracking the S&P 500 (SPY), health care sector (XLV), and consumer discretionary sector (XLY). Backtesting of rebalancing the highest market capitalization stocks in the ETFs based on dynamic confidence intervals of S-Scores shows the sentiment-enhanced ETFs yield better returns than the original benchmarks.
This document is a capstone project report analyzing the Australia grocery market which is dominated by Woolworth and Coles with over 60% combined market share. The report includes an introduction outlining the research topic and background. It then provides a literature review on relevant anti-combination laws, the effects of monopoly, and risk analysis. The report also describes the data collection and analysis methodology to be used. It will analyze factors related to the grocery industry and identify hypotheses about whether the current monopoly is optimal for the Australian market and consumers. The conclusion will forecast if other competitors could become major players by utilizing appropriate short- and long-term strategies.
A Study on Stock’s Volatility in Banking Sector using Technical AnalysisIRJET Journal
This document discusses a study on analyzing the volatility of stocks in the Indian banking sector using technical analysis tools. It aims to determine which banks perform better based on price fluctuations. The study uses tools like Bollinger bands and Relative Strength Index (RSI) to analyze weekly share price movements of six banks (Allahabad Bank, Bank of India, Oriental Bank of Commerce, Vijaya Bank, Corporation Bank, and Canara Bank) over three years. The results show that Canara Bank and Vijaya Bank exhibited the highest volatility and returns compared to other banks during the period. The analysis of technical indicators can help investors identify optimal times to buy and sell bank stocks and predict market movements.
The document outlines the agenda and overview for the Winter 2010 Stock Analyst Program. It discusses topics that will be covered each week, including macroeconomic analysis, industry analysis, stock valuation methodology, and important financial ratios. Resources for conducting equity research such as relevant websites, Bloomberg functions, and company filings are also provided.
2012 what are the performance drivers of the global managed volatilityFrederic Jamet
1) The Global Managed Volatility strategy has outperformed the market index over the past 13 years while significantly reducing risk, as measured by volatility.
2) The strategy's outperformance is driven by its low exposure to the underperforming market factor during this period, as well as positive exposure to the value and small-cap factors.
3) Exposure to value stocks can be attributed to these stocks' neglected nature and de-correlated behavior, while exposure to small-caps comes from their greater number leading to more frequent selection in a non-market cap weighted strategy. The strategy's performance is diversified across multiple factors rather than relying solely on volatility reduction.
Skills for Prosperity? A review of OECD and Partner Country Skill StrategiesWesley Schwalje
The Centre for Learning and Life Chances in Knowledge Economies and Societies at the Institute of Education, University of London cited Tahseen Consulting's research on the governance of skills formation in knowledge-based economies as a potential model for more effective national education and skills formation strategies.
The document provides an overview of various topics to be covered in a stock analyst program, including portfolio performance, equity analysis techniques, macroeconomic analysis, valuation methodologies, investment styles, and key financial ratios. It discusses approaches like discounted cash flow valuation, comparable companies analysis, and precedent transactions. It also covers different investment strategies such as value investing, growth investing, and contrarian investing.
2017 Supply Chains to Admire - 13 JUN 2017 reportLora Cecere
The Supply Chains to Admire™ analysis is an annual study of supply chain excellence. Now in its fourth year of development, the focus of this research is to better understand supply chain performance and improvement of 494 publicly held companies in 31 peer groups for the period of 2010-2016. At the 2017 Supply Chain Insights Global Summit, winners from the analysis will share insights on driving supply chain excellence.
A study on financial performance analysis at cee veeAKHILHARIDAS
This document provides an overview of the global and Indian footwear industry. It discusses the history of footwear dating back to ancient civilizations. India has a large livestock population and is one of the largest producers and exporters of footwear globally, especially leather footwear. The key products exported are leather footwear, footwear components, leather garments, and leather goods. The footwear industry is concentrated in certain regions and states of India like Tamil Nadu, Delhi, Agra and Kanpur. The document also provides statistics on India's annual footwear production capacity and imports.
2012 what drives value tilt portfolios overperformanceFrederic Jamet
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The Supply Chains to Admire™ analysis is an annual study of supply chain excellence. Now in its fifth year of development, the focus of this research is to better understand supply chain performance and improvement of 655 publicly held companies in 28 peer groups for the period of 2010-2017. This year there are 31 winners! At the 2018 Supply Chain Insights Global Summit, winners from the analysis will share insights on driving supply chain excellence.
This document summarizes performance of real estate securities funds for April 2015 and year-to-date. It includes sections on April performance by fund size and region, YTD performance by size and region, and a focus article on smart beta strategies for REITs. The focus article previews two papers, one by the author and Kieran Farrelly showing how smart beta strategies outperformed the market index from 2004-2014, and another by C. Stace Sirmans and G. Stacy Sirmans on an unexpected value strategy for US REITs from 1985-2013.
Launch of the Supply Chain Index - 11 JUNE 2013Lora Cecere
This document introduces a new Supply Chain Index that aims to determine which supply chain metrics correlate most strongly with financial market valuations, as measured by market capitalization, across different industries. It describes 18 months of research analyzing correlations between supply chain financial ratios and market cap data for various industries. Key findings include that the metrics that matter most vary significantly by industry, and that some industries like household/personal products have clear supply chain leaders while others do not. The report aims to help supply chain leaders understand which metrics have the greatest impact on improving shareholder value for their specific industry.
Hong Kong Stock Research. What Drives Hong Kong Stock Price Out Performance. ...lvxresearch
What Drives Company Stock Price Out Performance in Hong Kong? What Fundamental Stock Investment Strategies Have Been Working Consistently in Hong Kong? What Ranked Metrics Have Historically Signalled Stock Prices Will Outperform?
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An Empirical Analysis of the Capital Asset Pricing Model.pdfSaiReddy794166
The International Journal of Engineering and Science and Research is an online journal in English published. The aim is to publish peer reviewed research and review articles fastly with out delay in the developing field of engineering and science Research.
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This document is a case study analysis of Tesco PLC that was submitted as a university course assignment. It includes:
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A Sales Forecasting Model Based on Internal Organizational Variables.pdfAnna Landers
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A Study on Empirical Testing of Capital Asset Pricing Model is compared with many blue chip companies with the help of detailed questionnaire to understand the problem statement. Visit http://www.projectskart.com/p/contact-us.html for more information.
Similar to Absolute and Relative VaR of a mutual fund. (20)
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
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Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
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Ponzi schemes, a notorious form of financial fraud, have plagued America’s investment landscape for decades. Named after Charles Ponzi, who orchestrated one of the most infamous schemes in the early 20th century, these fraudulent operations promise high returns with little or no risk, only to collapse and leave investors with significant losses. This article explores the nature of Ponzi schemes, notable cases in American history, their impact on victims, and measures to prevent falling prey to such scams.
Understanding Ponzi Schemes
A Ponzi scheme is an investment scam where returns are paid to earlier investors using the capital from newer investors, rather than from legitimate profit earned. The scheme relies on a constant influx of new investments to continue paying the promised returns. Eventually, when the flow of new money slows down or stops, the scheme collapses, leaving the majority of investors with substantial financial losses.
Historical Context: Charles Ponzi and His Legacy
Charles Ponzi is the namesake of this deceptive practice. In the 1920s, Ponzi promised investors in Boston a 50% return within 45 days or 100% return in 90 days through arbitrage of international reply coupons. Initially, he paid returns as promised, not from profits, but from the investments of new participants. When his scheme unraveled, it resulted in losses exceeding $20 million (equivalent to about $270 million today).
Notable American Ponzi Schemes
1. Bernie Madoff: Perhaps the most notorious Ponzi scheme in recent history, Bernie Madoff’s fraud involved $65 billion. Madoff, a well-respected figure in the financial industry, promised steady, high returns through a secretive investment strategy. His scheme lasted for decades before collapsing in 2008, devastating thousands of investors, including individuals, charities, and institutional clients.
2. Allen Stanford: Through his company, Stanford Financial Group, Allen Stanford orchestrated a $7 billion Ponzi scheme, luring investors with fraudulent certificates of deposit issued by his offshore bank. Stanford promised high returns and lavish lifestyle benefits to his investors, which ultimately led to a 110-year prison sentence for the financier in 2012.
3. Tom Petters: In a scheme that lasted more than a decade, Tom Petters ran a $3.65 billion Ponzi scheme, using his company, Petters Group Worldwide. He claimed to buy and sell consumer electronics, but in reality, he used new investments to pay off old debts and fund his extravagant lifestyle. Petters was convicted in 2009 and sentenced to 50 years in prison.
4. Eric Dalius and Saivian: Eric Dalius, a prominent figure behind Saivian, a cashback program promising high returns, is under scrutiny for allegedly orchestrating a Ponzi scheme. Saivian enticed investors with promises of up to 20% cash back on everyday purchases. However, investigations suggest that the returns were paid using new investments rather than legitimate profits. The collapse of Saivian l
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Confirmation of Payee (CoP) is a vital security measure adopted by financial institutions and payment service providers. Its core purpose is to confirm that the recipient’s name matches the information provided by the sender during a banking transaction, ensuring that funds are transferred to the correct payment account.
Confirmation of Payee was built to tackle the increasing numbers of APP Fraud and in the landscape of UK banking, the spectre of APP fraud looms large. In 2022, over £1.2 billion was stolen by fraudsters through authorised and unauthorised fraud, equivalent to more than £2,300 every minute. This statistic emphasises the urgent need for robust security measures like CoP. While over £1.2 billion was stolen through fraud in 2022, there was an eight per cent reduction compared to 2021 which highlights the positive outcomes obtained from the implementation of Confirmation of Payee. The number of fraud cases across the UK also decreased by four per cent to nearly three million cases during the same period; latest statistics from UK Finance.
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3. Group Assignment – Style Analysis
The analysis carried out is grounded on the application of Sharpe's Style Analysis to the mutual
fund BGF GLOBAL EQUITY FUND CLASS A2 EUR and will allow us to assess its composition relying
on publicly available quotations of the fund itself obtained from the website www.blackrock.co.uk.
Indexes Selection
Since BGF GLOBAL EQUITY FUND CLASS A2 EUR is a global fund, we reckon that a proper Style
Analysis should be based on both geographic areas and industry sectors rather than on specific
styles.
For what concerns the indexes to be used to perform the Style Analysis by Industry Sectors we
have decided to include ten of them, choosing each one according to the characteristics of mutual
exclusivity, exhaustivity and low level of correlation that each asset class should have.
Initially, we intended to select indexes according to their average mutual correlation1
, but such a
method provided us with inconsistent results because many of them were not mutually exclusive.
For instance, basing on this reasoning we had to include on our analysis both Pharmaceutical,
Biotech, Pharma/Biotech and Healthcare together as indexes. However, Healthcare Sector already
includes both Pharma and Biotech and Pharma/Biotech which of course already embeds both
Biotech and Pharma.
This is the list of the sectors that have been included in the analysis:
Industrials
Materials
Consumer Discretionary
Energy
IT
Consumer Staples
Health Care
Financials
Telecommunication
Utilities
According to the MSCI methodology selection criteria2
, these sectors are the most comprehensive
ones, in the sense that each company is contained in one and only one of the above said sectors
1
See Appendix I.
2
MSCI Global Investable Market Indexes Methodology. MSCI Index Research, pp. 98-106 (Appendix V: Global Industry
Classification Standard), November 2014.
4. Referring to the indexes to be used to carry out the Style Analysis by geographic areas, we have
decided to include seven of them with the aim of selecting all possible geographic areas. Thus, we
opted to take into account:
MSCI Emerging Markets Asia
MSCI Pacific
MSCI Europe
MSCI North America
MSCI Emerging Markets America Latina
MSCI Emerging Markets EMEA
In this way, we covered both North America and Latin America, as well as all European countries
(not only nations whose currency is Euro, but also States like Switzerland and UK which are not
comprised in indexes like MSCI EMU). Exposure to Europe, Middle East and Africa was guaranteed
by MSCI Emerging Markets EMEA. We covered the Asian world by using just two indexes: MSCI
Pacific which contains developed countries such as Australia, Hong Kong and Japan and MSCI
Emerging Market Asia which is made up of the emerging countries Korea, Taiwan, China, India. To
sum up, we had a complete coverage of the countries of the 5 continents by considering just 6
indexes. Furthermore, we decided to consider also the amount of money that the fund keeps in
cash by using a monetary market fund. In particular, we selected JPM Global 3M as a proxy for
cash.
The analysis does not change that much by including cash or not. Tactical and Strategic Style
Analysis yield the same results, thus showing that no cash is held by the fund. Rolling Style Analysis
reveals to us that a constant proportion equal to 1.6% is kept in cash. The fact that the figure is
constant over time may seem odd, but there is no reason to exclude the fact that Blackrock
manager’s systematically keep a portion of the fund invested in cash to satisfy redemption needs.
Blackrock itself discloses that roughly 4% of assets are put in cash.
We also considered alternative combinations of index. We thought about splitting up MSCI North
America into MSCI USA and MSCI Canada, which are the only two constituents of the first
mentioned index. Plus, we had intention to cover Europe by using two variables: MSCI Europe ex
UK and MSCI UK. At first sight, such a combination appeared to us more sensible because it allows
to clearly identify the weights of the countries in which the fund allocates a big share (54% in USA
and 7% in UK), while isolating the contribution of other countries of lower importance together.
When we ran the analysis, we saw that it produced unreasonable results3
. This is probably due to
the fact that the system is not able to distinguish UK from rest of Europe, thus returning an
abnormally low result for UK.
Furthermore, as there are some variables with zero-weight, we considered the possibility just to
use 4 indexes: Europe, North America, Pacific and Emerging Markets. In this case, the R-squared
appeared to be quite low (70%), so we dropped this model.
3
Namely, only 1% invested in UK when the actual percentage is instead 7%.
5. Sector Style Analysis
Strategic
The Strategic Style Analysis is implemented by using 60 months of data.
As it is possible to see in the graph below, almost half of the total allocation appears to have been
assigned to Consumer Discretionary. Furthermore, Materials, Industrials and Energy hold a
significant portion of the portfolio: the allocation relative to these ones is respectively 22,5%, 7,1%
and 4,1%.
However, no shares have been allocated to IT, Telecommunications and Utilities.
The R-squared achieved by this approach is quite satisfying, as it is 80,31%.
Rolling
It is helpful to examine the behavior of a manager's average exposure to asset classes by
implementing a Time Series Analysis, by the use of a fixed number of periods for each one through
time. To do so, we performed a Rolling Style Analysis, which iterates through the multivariate
regression model in a series of continuous time windows, each of them with a fixed number of
observations.
In our analysis, we used a rolling window of 36 weeks, which is updated for 24 periods.
As it is plainly evident, there is a significant allocation to Consumer Discretionary.
However, in recent months we witness a pattern reversion, as the fund managers suddenly
decided to disinvest from the index. The same thing happened to MSCI World Materials and MSCI
World Industrials.
Correspondingly, managers tended to increase the weights given to new indexes such as MSCI
World Energy and MSCI World Utilities.
It appears that there has been a lot of activism of asset managers. This could be partly explained
by the fact that managers in charge of the fund changed frequently.
The R-squared of the Rolling Style Analysis rarely falls below 80%. This is a good result, since it
means that the model explains most of the variability of the independent variable.
7,1%
22,5%
4,1%
54,2%
2,9%
5,9%
3,4%
0,0% 0,0% 0,0%
Energy Materials Industrials Cons.
Discr.
Cons.
Staples
Health
Care
Financials IT TLC Utilities
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
Strategic Style Analysis
6. Tactical
If the main goal is to monitor the more recent situation, the Tactical Style Analysis perfectly
matches such objective. This method is implemented by using the last 52 weeks of data.
It is possible to notice that on the one hand, the fund managers fully disinvested from Financials,
Chemicals and Infrastructure while on the other hand, they greatly rose the share invested in new
sectors such as Industrials, Materials and Energy. Their weights respectively increased to 25,4%,
23,9% and 10%.
The graph below also confirms what has been demonstrated in the previous Rolling Window
Analysis, that is the downward trend of the weight given to Consumer Discretionary, which
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rolling Style Analysis
MSCI World Utilities
MSCI World Telecomunications
MSCI World IT
MSCI World Financials
MSCI World Health Care
MSCI World Cons. Staples
MSCI World Cons. Discr.
MSCI World Industrials
MSCI World Materials
MSCI World Energy
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
31-Oct-2012 31-Mar-2013 31-Aug-2013 31-Jan-2014 30-Jun-2014
Style R2
7. dropped to 16,5%. The Tactical Style Analysis shows an acceptable value of the R-squared, 78,92%.
Geographic Style Analysis
Strategic
The Strategic Style Analysis is carried out by using 60 months. The R-squared obtained with such a
method is equal to 79.74%. We deem that such a value is rather acceptable since it is close to 80%.
10,0%
23,9%
25,4%
16,5%
10,4%
3,0%
0,0%
10,9%
0,0% 0,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
Tactical Style Analysis
0,0%
28,3%
0,0%
5,8%
25,2%
40,7%
0,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
EM LatAm EM Asia Pacific EM EMEA Europe North Am Cash
Strategic Style Analysis
8. The allocation to Developed Countries is equal to 65.9%, although this figure has changed
significantly over time4
. For what concerns Emerging Markets, the fund seems to invest largely in
Asian Developing Countries (28.3%), while only a marginal quantity of assets is allocated in EMEA
Emerging Countries (5,8%).
Rolling
The Rolling Style Analysis is performed by using a rolling window made up of 36 weeks which is
updated for 24 periods. This technique allows us to have an indication of how the managers
changed the allocation to each geographic area.
A pattern clearly emerges from the Rolling Style Analysis: the fund managers progressively
disinvested from Emerging Markets like EMEA and America Latina. They also took money out of
Asia-Pacific area. Symmetrically, they increased the share invested in North America and only very
recently they have allocated more money to Asian Emerging Countries.
The overall picture we got from this analysis is that the managers invested more in Developed
Economies and at the same time shrank the weight given to Developing Countries.
As a matter of fact, the share allotted to Europe and North America in September 2012 was equal
to 40%, even if such an allocation reached 70% two years later. Of course, this consideration is a
clear evidence of the level of activism of the fund. A point which may seem odd is the straight line
in the top part of the chart that shows us that the share invested in cash is literally always
4
See next paragraph.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rolling Style Analysis
JPM Global 3 mesi
MSCI Nord America
MSCI Europa
MSCI Emerging Market EMEA
MSCI Pacifico Free
MSCI Emerging Market Free Asia
MSCI Emerging Market Free America
Latina
9. constant over time. As we said earlier, we have no reason to exclude that Blackrock managers’
systematically keep 1.6% of the fund in cash.
The R-squared of the Rolling Style Analysis is quite often above 80%. After July 2014, the method
proves to be affected by a lower power in explaining the sources of fund return as the R-squared
falls below 80%. This might be the indication of a change in the fund allotment which has not
already been captured by the Style Analysis. This interpretation is confirmed by the fact that the
latest allocation resulting from the Rolling Style Analysis is rather different from the one of the
Tactical Style Analysis5
.
Tactical
A more updated view of fund is offered by the Tactical Style Analysis. It takes into account the last
52 weeks of data, thus allowing us to have a more recent image of how the assets have been
allocated.
The R-squared is 86.38%, a value which is more than acceptable.
In order to get a clear idea of how the allocation has changed over time, we compared the index
weights resulting from the latest rolling window (i.e. the latest 36 months) and the ones from the
Tactical Style Analysis carried out on the latest 52 weeks. According to the data obtained, it
5
See next paragraph.
31-Jul-2014
0
0,2
0,4
0,6
0,8
1
30-Sep-2012 28-Feb-2013 31-Jul-2013 31-Dec-2013 31-May-2014
Style R2
0,0%
1,5%
15,7%
35,5% 35,3%
12,1%
0,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
EM LatAm EM Asia Pacific Europe North America EM EMEA Cash
Tactical Style Analysis
10. appears that the asset managers overweighed Europe and underweighted North America.
Surprisingly, the weight assigned to Asian Emerging Countries dropped sharply from 25% to 1.5%.
At the same time, the fund exhibits a stake which goes from zero to a not negligible figure for
many indexes. This is the case for Pacific (from 0% to 15.7%) and for EM EMEA (from 0% to 12.1%).
The point is: did the allocation really swing so dramatically or is there any kind of estimation error?
In order to answer to this question, we compared the figures we got from our analysis with the
numbers officially published by Blackrock. We realized that the latest rolling style analysis gives us
results which are closer to the ones given by the management company, while the percentages
obtained through the Tactical Analysis seem to be more weird than before. For example, we have
55% of allocation to North America according to Blackrock and 51% according to the Rolling Style
Analysis, then we have 22% allocated to Europe versus 20% resulting from our analysis. The
Rolling Style Analysis appears to fail in distinguishing allocations of emerging countries, but it looks
like that the picture we had from the Rolling Style is more sensitive than the one we got from the
Tactical Analysis.
0
0,1
0,2
0,3
0,4
0,5
0,6
EM LatAm EM Asia Pacific Europe North America EM EMEA Cash
How the allocation has changed over time
First Rolling (36 Months) Latest Rolling (36 Months) Tactical (52 Weeks)
11. Confidence Interval
Weights
1_EM
America
Latina 2_EM Asia 3_Pacifico
4_EM
EMEA 5_Europa
6_Nord
America
1_EM America Latina 26,4% -6,1% 42,7% -6,5% 11,1%
2_EM Asia 42,3% 27,4% 25,6% 7,9% 17,6%
3_Pacifico -9,0% 25,0% 11,3% 12,3% 44,4%
4_EM EMEA 56,0% 20,9% 10,2% 35,4% -14,1%
5_Europa -9,7% 7,3% 12,6% 40,2% 41,0%
6_Nord America 20,3% 20,3% 56,0% -19,8% 50,8%
Sum of weights 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%
R-squared 68% 65% 46% 71% 54% 47%
Confidence Interval 7,06% 8,93% 8,53% 8,07% 8,60% 9,57%
We adopted Lobosco and Di Bartolomeo’s procedure as a tool to test the goodness of our index
choice. The procedure outlined by the two authors envisages regressions of each index on the
others to discover, for each variable, the amount of information which is already contained in the
remaining indexes. This implies that the factors presenting a high level of R-squared have a
volatility well explained by the ones of the others. This means that such indexes do not add any
information to the dependent variable so they are supposed to be dropped.
Furthermore, Lobosco and Di Bartolomeo’s methodology allows to come up with confidence
intervals for the weights obtained in the Strategic Style Analysis. There is no need to say that the
lower the confidence interval, the better is the index choice.
Some regressions show a high R-squared (60/70%). This cannot be due to a geographic overlap, as
we have accurately avoided it during the preliminary selection of the factors. The most likely
reason is that there is a sort of Sector-Overlapping, namely that the indexes have exposure the
same industry sector.
On the contrary, the Confidence Interval is always low as it never exceeds 10%. This result confirms
the high accuracy of the chosen indexes .
Efficient Frontier
Rather than using just 10 portfolios, which would have produced an unreadable chart, we took
into account 10 portfolios by equally spacing the returns from the minimum index to the maximum
index (as asked by the assignment), plus 5 portfolios with equally spacing returns from 0.19% to
0.13% in order to display better the inefficient part of the frontier. Of course, we plotted the fund
portfolio (the violet dot), the minimum variance portfolio (in green) and the benchmark portfolio
resulting from the Style Analysis (in brown). We also charted the indexes used for the
12. Geographical Style Analysis. Since the minimum variance portfolio is almost only invested in cash,
we decided to calculate also the minimum variance portfolio excluding cash (red dot). This last
portfolio lays on the inefficient area of the risk-return chart: this means that the use of cash allows
to enhance the risk-return profile with respect to only equity portfolios
.As it is possible to see the fund does not lie on the
efficient frontier, although it has been able to
generate higher returns with lower volatility with
respect to 4 indexes. The fund is dominated by the
benchmark obtained thanks to the Style Analysis and
by MSCI North America, which is the only portfolio to
be on the efficient frontier. On the other side, MSCI
Emerging Markets Latin America has been the worst
index, as it is aligned on the inefficient frontier.
Overall, it seems that the fund managers provided a
modest risk-adjusted return. This is also confirmed by
the t-test we performed against the MSCI World used
as benchmark. We hypothesized a difference in the
average returns equal to zero and the test failed to reject the null hypothesis. This is equivalent to
say that there is no sufficient statistical evidence to claim that the fund provided better returns
with respect to the benchmark.
0,13%
0,26%
0,39%
0,52%
0,64%
0,77%
0,90%
1,03%
1,15%
North America
MV
0,14%
0,15%0,16%0,17%0,18%
Benchmark
Fund
EM LatAm
EM Asia
Pacific
EM EMEA
Europe
1,28%
Cash
MVadj
0,00%
0,20%
0,40%
0,60%
0,80%
1,00%
1,20%
1,40%
0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00%
ExpectedReturn
Standard Deviation
Efficient Frontier
Test t:two samples with
different variances
MSCI
World BGF
Mean 0,0095 0,0079
Variance 0,0007 0,0012
# Obs 60 60
Difference 0
gdl 112
Stat t 0,3009