Conquering the Seven Faces of Risk
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Should U.S. Investors Invest Overseas?
Should U.S. Investors Invest Overseas? nterest in foreign investment has been high among U.S. investors in recent years. The unprecedented growth of 401k pension plans has Igreatly increased the number of people who must make their own investment decisions in planning for their retirement. Many investors know that geographic diversification can improve investment returns without increasing risk. However, whether or not to invest abroad and, if so, how much weight to give to foreign investment, are questions often subject to heated debate. Some investment advisors recommend that U.S. investors put as much as one-third of their stock portfolio in foreign stocks to take advantage of the benefits of diversification. Others believe that foreign investment should play only a small role, if any, in a U.S. investor’s stock portfolio. They argue that political uncertainties and currency fluctuations make the value of foreign investments far more volatile for the investor without the offsetting benefits of higher returns, and that diversification benefits are not enough to offset this disadvan- tage.1 Moreover, U.S. investors can get overseas exposure by investing in the stocks of domestic companies. Many U.S. multinationals that are part of the Dow Jones Industrial Average, such as IBM and Coca-Cola, derive a substantial portion of their revenue from overseas operations. The question of whether or not to invest abroad is part of the larger question of how to assemble a portfolio that is appropriate for the investor’s circumstances and degree of risk tolerance. Modern portfolio theory, introduced by Markowitz in the 1950s, uses optimization tech- Katerina Simons niques and historical data on the returns, risks, and correlations of available securities to construct a portfolio with the lowest possible risk for a given level of return. -
An Overview of the Empirical Asset Pricing Approach By
AN OVERVIEW OF THE EMPIRICAL ASSET PRICING APPROACH BY Dr. GBAGU EJIROGHENE EMMANUEL TABLE OF CONTENT Introduction 1 Historical Background of Asset Pricing Theory 2-3 Model and Theory of Asset Pricing 4 Capital Asset Pricing Model (CAPM): 4 Capital Asset Pricing Model Formula 4 Example of Capital Asset Pricing Model Application 5 Capital Asset Pricing Model Assumptions 6 Advantages associated with the use of the Capital Asset Pricing Model 7 Hitches of Capital Pricing Model (CAPM) 8 The Arbitrage Pricing Theory (APT): 9 The Arbitrage Pricing Theory (APT) Formula 10 Example of the Arbitrage Pricing Theory Application 10 Assumptions of the Arbitrage Pricing Theory 11 Advantages associated with the use of the Arbitrage Pricing Theory 12 Hitches associated with the use of the Arbitrage Pricing Theory (APT) 13 Actualization 14 Conclusion 15 Reference 16 INTRODUCTION This paper takes a critical examination of what Asset Pricing is all about. It critically takes an overview of its historical background, the model and Theory-Capital Asset Pricing Model and Arbitrary Pricing Theory as well as those who introduced/propounded them. This paper critically examines how securities are priced, how their returns are calculated and the various approaches in calculating their returns. In this Paper, two approaches of asset Pricing namely Capital Asset Pricing Model (CAPM) as well as the Arbitrage Pricing Theory (APT) are examined looking at their assumptions, advantages, hitches as well as their practical computation using their formulae in their examination as well as their computation. This paper goes a step further to look at the importance Asset Pricing to Accountants, Financial Managers and other (the individual investor). -
Post-Modern Portfolio Theory Supports Diversification in an Investment Portfolio to Measure Investment's Performance
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Rasiah, Devinaga Article Post-modern portfolio theory supports diversification in an investment portfolio to measure investment's performance Journal of Finance and Investment Analysis Provided in Cooperation with: Scienpress Ltd, London Suggested Citation: Rasiah, Devinaga (2012) : Post-modern portfolio theory supports diversification in an investment portfolio to measure investment's performance, Journal of Finance and Investment Analysis, ISSN 2241-0996, International Scientific Press, Vol. 1, Iss. 1, pp. 69-91 This Version is available at: http://hdl.handle.net/10419/58003 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend -
Roth IRA Vantagepoint Funds
Vantagepoint IRA Funds Stable Value/CashManagement Funds Code U.S. Stock Funds Code Dreyfus Cash Management Fund, Class Participant DPCXX MX Legg Mason Capital Management Value Trust, Class Financial Intermediary LMVFX G6 Bond Funds Code Vantagepoint Growth Fund VPGRX MG Vantagepoint Low Duration Bond Fund VPIPX MB Janus Fund, Class S JGORX 6C Vantagepoint Core Bond Index Fund, Class I VPCIX WM T Rowe Price® Growth Stock Fund, Class Advisor TRSAX PX PIMCO Total Return Fund, Class Administrative PTRAX XM T Rowe Price® Blue Chip Growth Fund, Class Advisor PABGX TC Vantagepoint Ination Protected Securities Fund VPTSX MT Legg Mason Capital Management Growth Trust, Class Financial Intermediary LMGFX ES PIMCO Real Return Fund, Class Administrative PARRX HK Janus Forty Fund, Class S JARTX AG PIMCO High Yield Fund, Class Administrative PHYAX XT Vantagepoint Select Value Fund VPSVX M2 Balanced/Asset Allocation Funds Code Fidelity Advisor Value Fund, Class A FAVFX 5F Vantagepoint Milestone Retirement Income Fund VPRRX 4E Vantagepoint Mid/Small Company Index Fund, Class I WDVPSIX Vantagepoint Milestone 2010Fund VPRQX CA Legg Mason Capital Management Special Investment Trust, Class Financial Intermediary LGASX 3V Vantagepoint Milestone 2015Fund VPRPX CH Fidelity Advisor Leveraged Company Stock Fund, Class A FLSAX VV Vantagepoint Milestone 2020Fund VPROX CJ Vantagepoint Aggressive Opportunities Fund VPAOX MA Vantagepoint Milestone 2025Fund VPRNX CN Janus Enterprise Fund, Class S JGRTX N4 Vantagepoint Milestone 2030Fund VPRMX CR American Century® Vista -
Portfolio Management Under Transaction Costs
Portfolio management under transaction costs: Model development and Swedish evidence Umeå School of Business Umeå University SE-901 87 Umeå Sweden Studies in Business Administration, Series B, No. 56. ISSN 0346-8291 ISBN 91-7305-986-2 Print & Media, Umeå University © 2005 Rickard Olsson All rights reserved. Except for the quotation of short passages for the purposes of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior consent of the author. Portfolio management under transaction costs: Model development and Swedish evidence Rickard Olsson Master of Science Umeå Studies in Business Administration No. 56 Umeå School of Business Umeå University Abstract Portfolio performance evaluations indicate that managed stock portfolios on average underperform relevant benchmarks. Transaction costs arise inevitably when stocks are bought and sold, but the majority of the research on portfolio management does not consider such costs, let alone transaction costs including price impact costs. The conjecture of the thesis is that transaction cost control improves portfolio performance. The research questions addressed are: Do transaction costs matter in portfolio management? and Could transaction cost control improve portfolio performance? The questions are studied within the context of mean-variance (MV) and index fund management. The treatment of transaction costs includes price impact costs and is throughout based on the premises that the trading is uninformed, immediate, and conducted in an open electronic limit order book system. These premises characterize a considerable amount of all trading in stocks. -
Vanguard Fund Fact Sheet
Fact sheet | June 30, 2021 Vanguard® Vanguard Dividend Growth Fund Domestic stock fund Fund facts Risk level Total net Expense ratio Ticker Turnover Inception Fund Low High assets as of 05/28/21 symbol rate date number 1 2 3 4 5 $51,232 MM 0.26% VDIGX 15.4% 05/15/92 0057 Investment objective Benchmark Vanguard Dividend Growth Fund seeks to Dividend Growth Spliced Index provide, primarily, a growing stream of income over time and, secondarily, long-term capital Growth of a $10,000 investment : January 31, 2011—D ecember 31, 2020 appreciation and current income. $33,696 Investment strategy Fund as of 12/31/20 The fund invests primarily in stocks that tend to $32,878 offer current dividends. The fund focuses on Benchmark high-quality companies that have prospects for as of 12/31/20 long-term total returns as a result of their ability 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 to grow earnings and their willingness to increase dividends over time. These stocks typically—but not always—will be undervalued Annual returns relative to the market and will show potential for increasing dividends. The fund will be diversified across industry sectors. For the most up-to-date fund data, please scan the QR code below. Annual returns 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fund 9.43 10.39 31.53 11.85 2.62 7.53 19.33 0.18 30.95 12.06 Benchmark 6.32 11.73 29.03 10.12 -1.88 11.93 22.29 -1.98 29.75 15.62 Total returns Periods ended June 30, 2021 Total returns Quarter Year to date One year Three years Five years Ten years Fund 6.56% 11.10% 33.04% 17.04% 14.69% 13.45% Benchmark 5.79% 10.46% 34.52% 17.30% 15.48% 13.09% The performance data shown represent past performance, which is not a guarantee of future results. -
MODERN PORTFOLIO THEORY: FOUNDATIONS, ANALYSIS, and NEW DEVELOPMENTS Table of Contents
MODERN PORTFOLIO THEORY: FOUNDATIONS, ANALYSIS, AND NEW DEVELOPMENTS Table of Contents Preface Chapter 1 Introduction (This chapter contains three Figures) 1.1 The Portfolio Management Process 1.2 The Security Analyst's Job 1.3 Portfolio Analysis 1.3A Basic Assumptions 1.3B Reconsidering The Assumptions 1.4 Portfolio Selection 1.5 Mathematics Segregated to Appendices 1.6 Topics To Be Discussed Appendix - Various Rates of Return A1.1 The Holding Period Return A1.2 After-Tax Returns A1.3 Continuously Compounded Return PART 1: PROBABILITY FOUNDATIONS Chapter 2 Assessing Risk (This chapter contains six Numerical Examples) 2.1 Mathematical Expectation 2.2 What is Risk? 2.3 Expected Return 2.4 Risk of a Security 2.5 Covariance of Returns 2.6 Correlation of Returns 2.7 Using Historical Returns 2.8 Data Input Requirements 2.9 Portfolio Weights 2.10 A Portfolio’s Expected Return 2.11 Portfolio Risk 2.12 Summary of Conventions and Formulas MODERN PORTFOLIO THEORY - Table of Contents – Page 1 Chapter 3 Risk and Diversification: An Overview (This chapter contains ten Figures and three Tables of real numbers) 3.1 Reconsidering Risk 3.1A Symmetric Probability Distributions 3.1B Fundamental Security Analysis 3.2 Utility Theory 3.2A Numerical Example 3.2B Indifference Curves 3.3 Risk-Return Space 3.4 Diversification 3.4A Diversification Illustrated 3.4B Risky A + Risky B = Riskless Portfolio 3.4C Graphical Analysis 3.5 Conclusions PART 2: UTILITY FOUNDATIONS Chapter 4 Single-Period Utility Analysis (This chapter contains sixteen Figures, four Tables -
An Exploitable Anomaly in the Ukrainian Stock Market?
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Caporale, Guglielmo Maria; Gil-Alana, Luis; Plastun, Alex Working Paper The weekend effect: An exploitable anomaly in the Ukrainian stock market? DIW Discussion Papers, No. 1458 Provided in Cooperation with: German Institute for Economic Research (DIW Berlin) Suggested Citation: Caporale, Guglielmo Maria; Gil-Alana, Luis; Plastun, Alex (2015) : The weekend effect: An exploitable anomaly in the Ukrainian stock market?, DIW Discussion Papers, No. 1458, Deutsches Institut für Wirtschaftsforschung (DIW), Berlin This Version is available at: http://hdl.handle.net/10419/107690 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend -
ICMA-RC Fund Sheet
COBB COUNTY FUND CODES SHEET Stable Value Fund Fund Code PLUS Fund ................................................................................................71 Vantagepoint Model Portfolio Funds Bond Funds Savings Oriented (Code SF) VP Core Bond Index Fund ..................................................................... WN VP US Government Securities Fund ....................................................... MT 5% International Fund VT PIMCO Total Return Fund (Administrative shares) ............................. I8 10% Growth & Income Fund VT PIMCO High Yield Fund (Administrative shares) .............................. L2 Balanced Funds 10% Equity Income Fund 35% Short-Term VP Asset Allocation Fund ........................................................................ MP VT Fidelity Puritan® Fund ......................................................................... 24 Bond Fund VP Savings Oriented Model Portfolio Fund .............................................. SF VP Conservative Growth Model Portfolio Fund ........................................ SG 30% Core Bond VP Traditional Growth Model Portfolio Fund ........................................... SL Index Fund 10% US Government VP Long-Term Growth Model Portfolio Fund ......................................... SM VP All-Equity Growth Model Portfolio Fund ........................................... SP Securities Fund VP Milestone Retirement Income Fund .................................................... 4E VP Milestone 2010 Fund ........................................................................ -
Investor Sentiment, Post-Earnings Announcement Drift, and Accruals
Investor Sentiment, Post-Earnings Announcement Drift, and Accruals Joshua Livnat New York University Quantitative Management Associates Christine Petrovits College of William & Mary We examine whether stock price reactions to earnings surprises and accruals vary systematically with investor sentiment. Using quarterly drift tests and monthly trading strategy tests, we find that holding good news firms (and low accrual firms) following pessimistic sentiment periods earns higher abnormal returns than holding good news firms (and low accrual firms) following optimistic sentiment periods. We also document that abnormal returns in the short-window around earnings announcements for good news firms are higher during periods of low sentiment. Overall, our results indicate that investor sentiment influences the source of excess returns from accounting-based trading strategies. Keywords: Investor Sentiment, Post-Earnings Announcement Drift, Accruals, Anomalies INTRODUCTION We investigate whether investor sentiment influences the immediate and long-run market reactions to earnings surprises and accruals. Investor sentiment broadly represents the mood of investors at any given time. Relying on behavioral finance theories, several studies examine how waves of investor sentiment affect assets prices (e.g., Brown and Cliff, 2005; Baker and Wurgler, 2006; Lemmon and Portniaguina, 2006). The general result from this literature is that following periods of low (high) investor sentiment, subsequent market returns are relatively high (low), suggesting that stocks are underpriced (overpriced) in low (high) sentiment states but that prices eventually revert to fundamental values. Because a common explanation for post-earnings announcement drift is that investors initially underreact to the earnings news and a common explanation for the accruals anomaly is that investors initially overreact to accruals, it is possible that investor sentiment plays a role in how these two accounting anomalies unfold. -
Momentum – the Premier Market Anomaly
Momentum – The Premier Market Anomaly Fama/French (2008): Momentum is "the center stage anomaly of recent years…an anomaly that is above suspicion…the premier market anomaly." This paper will share a simple example of the power of momentum, and more specifically, the power of combining relative strength momentum with absolute momentum. Absolute momentum is often referred to as trend following or time-series momentum. We highly recommend those who want to go further in depth to pick up Gary Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk1. We will start by creating a benchmark global equity portfolio that is equally allocated to US large cap stocks, US small cap stocks, and International stocks2. The benchmark portfolio is rebalanced monthly. Our analysis period is 1972–2014 which includes three substantial bear markets (1973-1974, 2000-2002, and 2008-2009) along with one of the most prolific bull market runs in recent history from 1982–1999. 1 Gary Antonacci is not affiliated with Lorintine Capital. Lorintine Capital does not receive any compensation for mentioning his book nor is it an endorsement. We provide his book as a third-party reference for those interested in learning more about momentum and the concepts presented in this paper. 2 Historical data represents index data. You cannot invest directly in an index. Indexes do not include fees, expenses, or transaction costs. All examples are hypothetical. Past performance does not guarantee future results. 1 Since 1972 our benchmark portfolio has produced double digit annual returns with a Compound Annual Growth Rate (CAGR) of 10.85%, enough to grow $100 to $8,465.493. -
Modern Portfolio Theory: Dynamic Diversification for Today’S Investor
Modern Portfolio Theory: DYNAMIC DIVERSIFICATION FOR TODAY’S INVESTOR Contact: Mitch Fee Alternative Investments Three Lakes Advisors (949) 533-2136 [email protected] Modern Portfolio Theory: Dynamic Diversification for Today’s Investor A Personal Message from Three Lakes Advisors ____________________________________________1 Modern Portfolio Theory _______________________________________________________________3 Growth of Managed Futures ____________________________________________________________4 Studies on Managed Futures Portfolio Impact and Performance ________________________________5 Hypothetical Examples of Adding Managed Futures to a Stock and Bond Portfolio __________________10 Are Managed Futures Riskier Than Stocks? ________________________________________________11 Academic Studies on Managed Futures ___________________________________________________11 What Are Professional Commodity Trading Advisors? ________________________________________14 The Professional Versus The Amateur Trader ______________________________________________15 Dynamic Diversification at an Affordable Cost ______________________________________________16 Our CTA Selection Process ____________________________________________________________17 Doubly Diversified CTA Portfolios ________________________________________________________17 The Investment Process _______________________________________________________________18 Questions & Answers _________________________________________________________________19 Trading futures and options involves