Equity portfolio management - Free Essay Example

Sample details Pages: 7 Words: 2150 Downloads: 7 Date added: 2017/06/26 Category Management Essay Type Analytical essay Did you like this example? Introduction Equity portfolio management includes passive management and active management. This two type of management are different in theory, objective and strategy. Some argue that à ¢Ã¢â€š ¬Ã…“hybridà ¢Ã¢â€š ¬Ã‚  active/passive equity portfolio management styles exist, but such styles really are variations of active management philosophies (Brown, and Reilly, 2012). Don’t waste time! Our writers will create an original "Equity portfolio management" essay for you Create order In this article, firstly, we will define active and passive management and discuss about the differences between these. Secondly, we will talk about the strategies of active and passive management with some example. Thirdly, we will analysis two managementsà ¢Ã¢â€š ¬Ã¢â€ž ¢ advantages and disadvantages with some examples. Finally will be a recommendation of management style choosing. Differences between Active management and passive management Active management refers to a portfolio management strategy where the managers make many specific investments with the goal of outperforming an investment benchmark index (Fuller, Han, and Tung, 2010) The aim of active management is to deliver a high return in the whole market. In another way to say, it aims to beat the return from a particular market index or benchmark (Vanguard, 2012). Investors could choose an adapt opportunity to adjust the portfolio, which could achieve the maximum profit and minimum risk. The active management is based on the assumption of inefficiency market; the debenture always has the correctness of pricing when the interest rate changed. Active management also depend on the human element, such as team managers, the single manager or co-managers, which could operate the portfolio with a convenience, efficiency and flexible way (Loth, 2014). The human element could depend on the current market to analyse, judge and forecast the debenture with their own experience; they know the time, when will buy or sell. Moreover, active management does not believe the efficient market hypothesis, managers believe that the market always has some incorrect price and other leaks, which is unconscious; they could use these leaks to maximum the profit. Passive management is a financial strategy in which a fund manager makes as few portfolio decisions as possible in order to minimize transaction costs, including the incidence of capital gains tax. One popular method is to mimic the performance of an externally specified index (Fuller, Han, and Tung, 2010). The goal of a passive portfolio is to match the returns to the index as closely as possible (Brown, and Reilly, 2012). This management believe the efficiency market hypothesis; it determines that the time line of market could reflect all the information, some specific stock pick will be fail, and the best strategy of investing is based on the index. (Loth, 2014) the passive management just follows the market, and have a less charge, all the data of stocks will be analyzed by the computer, and show to the investors. When the investors uses the passive management, it is that the investors do not care about the good performance of specific stock, they focus on the whole stocks have a good performance, and get the profit. Investors need collect all the stocks and bonds to achieve an excellent return. (Anspach, 2014) In conclude, an active decision could be thought as an investor making choices among many possible choices in order to create a portfolio. Passive investing is commonly viewed as not involving very many, if any, active decisions or arbitrary choices in the investment process. Strategies Active management strategies Active management strategies include fundamental, technical and asset allocation strategies. Fundamental strategies include the à ¢Ã¢â€š ¬Ã‹Å"Top-Downà ¢Ã¢â€š ¬Ã¢â€ž ¢ and à ¢Ã¢â€š ¬Ã‹Å"Bottom-Upà ¢Ã¢â€š ¬Ã¢â€ž ¢ approach. Top-down approach means that managers could start looking at the market as a whole, and then determine which industries or sectors are likely to do well given the current economic cycle. When the choice has made, the selection of specific stocks will be possible to have a best for a company. The Bottom-up has ignored the market conditions and expected return. Companies are based on the financial statement, product line, P/E, Growth and others to evaluate themselves, this approach means that the well-running companies will have a good performance, no matter what market conditions and expected return. (Loth, 2014) Secondly, Technical strategies means that the charts or grapes could determine the direction of stock, investors could depend on these direction to buy or sell. It could show the market is bull or bear, determine the time of buying or selling, and forecast the trend of stocks. Such as the Moving average, which is 50 days and 100 days, when the line of 50 days over the line of 100 days, this is a sign of buying, which means that the price of stocks will increasing in the future, or reverse. Contrarian investment strategy means that investors could buy some poor performance stocks, and sell them when these stocks have good performance. The price momentum strategies means that the good performance stocks will maintain a while, investors could buy these stocks, and sell them when these stocks get better. The earnings momentum strategies means when the earning per share of a company is increasing, then the sales or other index will increasing, investors could depend on this way to buy sto cks, which get the profit. The last on is the asset allocation strategies, which include the integrated asset allocation, strategic asset allocation, tactical asset allocation and insured asset allocation. The strategic asset allocation means that investors could hold the stocks and bonds as their asset, such as if an investor hold 50% stocks and 50% bonds, which has historical 10% and 5% return per year, then the total return of asset will be 7.5% per year. The tactical asset allocation could be a short-term; investors could continually adjust the asset to adapt the changing market. This way is flexible, which could fit for the different market situation. The insured asset strategy means that the portfolio of investors should have a basic return, if the portfolio achieves the basic return, the investors should increase the management, and achieve the maximum return. If the portfolio maintains the basic return, the investors will have a riskless asset. The investors and managers could change the weight of asse t, and over the basic return. Integrated asset allocation could examine the capital market conditions, investorà ¢Ã¢â€š ¬Ã¢â€ž ¢s objectives and constrains, this considers the economic expectation and the risk when the investors establish the mix asset, could not only consider the expectation, but also the actual change in capital market. It analyses the ability of risk tolerance. Investors could depend on the actual market situation to make the decision for changing mix asset or improve the mix asset. Passive management strategies For the strategies of passive management, it is index portfolio strategy, which include the full replication, sampling and quadratic optimization. Full replication means that the managers could purchase by the weight, which is similar with the index, which could be easy to track the index. The sampling means that ETF could provide a lot of pure physical replication, therefore, using the sampling techniques could be a good way to find a adapt index, in general, fund could utilize sampling to choose the index, and weighting. Such as the MSCI world index has more 1,600 sticks, buying all stocks is impossible, and inefficient, using sampling to choose a small weighting could achieve the correct target. Moreover, sampling is a cheap and statistical way, through buying the sample stock could know the weight in index. A small number of stocks could determine that the charge is less, fewer problem of reinvestment, and less difficult for rebalance. (Hughes, 2014) The quadratic optimization could comfirm the mix investing, which depend on the historic data and relevant information. This way could significantly decrease the tracking error for the index. The market will change with the time, which may cause the incorrect index. The formula is, the tracking error could be determined by . Therefore, investors could reply on this way to minimum the error of tracking index. Analysis and Evidences Through the comparison of passive and active management, investors could directly know when they should use the passive or active management, or how to use them. The passive management has some advantages, the investors have a lower fees, they do not need to analyse the stocks in the index, and it has transparency, investors know the time to buy or sell some kinds of stocks, moreover, the hold and buy of index fund will not large tax, because of the limited investing amount. The tax efficiency is high. The passive investor also could avoide the challenges and costs, which associate with the active managers. In the complex world, the smartest people also could stumble, and go to trouble. Beating the market is a difficult thing. However, passive management require the investors accept the configuration of indexes, no matter how risk holding and inherent. The SP 500 is managed by a committee which considers many factors, such as market capitalizations, sector representation, liquidity and positive earnings; holdings are adjusted regularly. By contrast, the Russell indexes has a rule per year, which is à ¢Ã¢â€š ¬Ã…“to ensure new and growing equities are reflected.à ¢Ã¢â€š ¬Ã‚  Poor performance Companies, in some cases, can be a material portion of a Russell index. In the case of bonds, some indexes do not account for defaults until they occur and occasionally contain illiquid securities (Whitehead, 2012) The passive management also will assumes a significant weighting to individual securities. The stocks will be larger, the money is valued by market capitalization in the indexes, which lead to the emphasis on some good performance companies or industries, forcing them to undertake the risks. Such as, over 30 percent of the SP 500 was invested in the energy sector in the 1970s and in technology and telecommunications in the 1990s, and 20 percent in financials, then in few years, the collapse of those sectors was because of large cap passive portfolios. For individual companies, passive management expose investorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ risks. For example, Nortel accounted occupy 36 percent in the Toronto Stock Exchangeà ¢Ã¢â€š ¬Ã¢â€ž ¢s main index in 2000, then its market capitalization dropped from $250 billion to less than $50 million, and bankruptcy in January 2008. Likewise, the top five mega-stocks occupy one-third of the loss in the SP 500 when the technology bubble burst in 2000. T herefore, the index may cause a significant risk. (Whitehead, 2012) For the advantage of active management, firstly, there is an opportunity for outperformance in active management as it aim to beat the index. Active management is flexible, which is different with the passive management, not require hold specific stock or bond. The hedging is also important, which managers could use short sales and put option to protect the investors minimum the losses. The investors could go out the specific holding risk, moreover, the active management could maintain the investors have a stable investing strategy and principle, higher average level record, and restrict risk management. For the disadvantage of active management, active management have a significant pressure, when the manager operate the investing, these mangers afraid the failure, they are always cooperation each other, they are investing defensively and avoid big error. The active management also will have relevant risk, such as the loss of personnel or clients, lagging performance, out-favour of strategy or style. The change of investing principle will lead to change of ownership. Recommendations The manager of active management maybe more useful in specialised areas, such as the technology, smaller companies and the emerging market. Passive management is suitable for the easy trade, such as Smetters, people has known this company that active managers are unlikely to gain any special insight. (Wharton, 2015) In my recommendation, the passive management is better than active management. This result is depend on the investorà ¢Ã¢â€š ¬Ã¢â€ž ¢s behaviour, current stock market, managerà ¢Ã¢â€š ¬Ã¢â€ž ¢s attitude and lower risk. Moreover passive management has lower charge, and convenience, investors could depend on the index to adjust their asset, and buying stocks. In recently, the active managers has a negative attitude, they afraid the fail, and be negative to make decision. Therefore, the passive management is better. References: Anspach, D. (2014) What Is The Difference Between Active and Passive Investing? About Money. [online] Available from: https://moneyover55.about.com/od/howtoinvest/a/activevspassive.htm [Accessed 12 March, 2015]. Brown, K.C. and Reilly, F.K. (2012)Analysis of Investments Management of Portfolios. 10th ed. Mason, Ohio: South-Western Cengage Learning. Fuller, R.J., Han, B. and Tung, Y.N. (2010) Thinking about indices and passive versus active management.Journal of Portfolio Management. 36 (4), pp. 35-47. Hughes, E.A (2012) Replication strategies for exchange-traded funds. FT Adviser [online]Available from: https://www.ftadviser.com/2014/03/19/investments/etfs-and-trackers/replication-strategies-for-exchange-traded-funds-GY6qJxCjhijedHruPpSm1I/article.html [Accessed 12 March, 2015]. Loth, R. (2014) Passive VS Active Management. Investopdia. [online] Available from: https://www.investopedia.com/university/quality-mutual-fund/chp6-fund-mgmt/ [Accessed 12 March, 2015]. Vanguard Asset Management (2012) Active and passive investing What do you need to know. [online]Available from: https://www.vanguard.co.uk/documents/portal/literature/active-passive-investing-guide.pdf [Accessed 12 March, 2015]. Wharton, University of Pennsylvana (2015) Active vs. Passive Investing: Which Approach Offers Better Returns? [online] Available from: https://executiveeducation.wharton.upenn.edu/thought-leadership/wharton-wealth-management-initiative/wmi-thought-leadership/active-vs-passive-investing-which-approach-offers-better-returns [Accessed 12 March, 2015]. Whitehead, R. (2012) Active versus passive investing. [online] Available from: https://www.abbotdowning.com/_asset/jnq16k/ActiveVersusPassiveInvesting.pdf [Accessed 12 March, 2015]. 1

Social Networking Sites Have Brought More Problems Than...

Social networking sites are a new revolution that deserves our attention, as we ourselves are part of this revolution. Social networking is an umbrella term that refers to the various activities that integrate technology, social interaction, and construction of words, pictures, audio and videos. Simply put, social networking is about the million of conversations that take place all over the world on social networking sites, which includes Facebook, MySpace, Twitter, online forums, etc. Proponents of online communities insist that they facilitate communication and connection globally, serves as a new business arena, and brings together people of common interests and allows them to air their views with no restrictions. Opponents of social†¦show more content†¦Teens using these sites may not be aware that the information they post is public and that photos and text can be retrieved even after deletion. 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Chronicles of Narnia Free Essays

Chronicles of Narnia The Chronicles of Narnia research paper The Chronicle of Narnia is a very interesting book, it has a classic Good vs. Evil plot. In this story four brave children a saved land. We will write a custom essay sample on Chronicles of Narnia or any similar topic only for you Order Now The book and the movie did not have many differences except for some that were small. To begin the plot of the book, the story takes place during the Second World War in London. Their father was gone in the war and they were living with their mother, there city was getting bombed so they were forced to evacuate. Their mother sent them away to live with Professor Digory Kirke who lived on the country side. They were very bored on a rainy day in England and decided to play hiding go seek. Lucy who was the youngest child was the weakest emotionally and was many times rejected cause of her young age. While in the house playing the game she stumbled upon a room in the back of the house hidden and secluded, were she decided to go. Struggling to find a place to hide she came upon a wardrobe. While in the wardrobe she discovers that it was a portal to a snow covered forest. She was so amazed by her unexpected path into this hidden world, while searching a looking around this land she met a faun. He introduces himself as Mr. Tumnus who invites her home for some tea. Once in the house he began to talk to her, telling her about Narnia an how once it was a beautiful land until it was taken over by the evil White witch who covered the land in snow. After speaking with Mr. Tumnus on this, she had to return to her home, having spent hours in Narnia, to find that only a few minutes have passed in England. She finds her sibling an explains to them of her indifferent experience in a strange land called Narnia. She is unable to convince the others of her adventure as the wardrobe now appears merely as a wardrobe. Several weeks later another game of hide and seek is going on when Lucy and Edmund both hide in the wardrobe, and find that It leads to Narnia. This time in Narnia Edmund and Lucy both have different experiences. While in Narnia, Edmund fails to catch up with Lucy and encounters a pale lady on a sledge, after reviling her identity Edmund is unaware of her evil hold on the land of Narnia and that by using him she can gain acces to the other children an stop the prophecies from being fulfilled, but she wins him over with a few Turkish delights. After returning from Narnia this time Lucy has someone who can tell of their adventure but Edmund denies all things that happened in Narnia and the land itself. A few days later all four children scramble to avoid Mrs. Macready who is showing some visitors around the house. They hide in the wardrobe and find themselves in Narnia. Lucy guides them to Mr. Tumnus’s cave were they found that he had been arrested by the White Witch for having Lucy in his cave, they also ransacked the cave and destroyed all things. A pair of two talking beavers (Mr. and Mrs. Beaver) who shelter the children and recount an ancient prophecy that the witches power will fail when the two sons of Adam and two daughters of eve will fill the four thrones at Cair Parvel. The beavers reveal that the true king of Narnia is great Lion King named Aslant. Edmund, who is still caught up in the witches lies runs away to her castle still thinking she is honest with, while the other children go off in search for Aslant who is the only one at the time with guidance and a solution . When Edmund arrives at the White Witches’s castle she treats him badly when she finds out that he did not return with his siblings, which was the only reason she befriended Edmund. Meanwhile the children find aslant and speak with him the go off in search for their betraying brother. They save Edmund just as he is about to be killed. This presents a problem because although they saved him the witch has claim to all traitors, but aslant (who is the representative of good and purity), sacrifices himself in his place, for one who is pure can serve as a sacrifice in the place of one who is impure. Aslant is sacrificed, but comes back to life through a deeper magic. Afterwards the children wage war against the evil White Witch an her army in a classic Good vs. Evil fight. In the Final Battle the white which is destroyed by aslant and the prophecies are fulfilled. Then the children are then taken to the castle were they see that the people of Narnia have been freed from the evil witches bondage ,then the four children are then named the Kings and Queens of Narnia.. There were some differences in the book but the movie played out nicely although it exaggerated such things, the author’s purpose was not lost. Some differences about the book and movie were that in the movie the white witch froze the whole land of Narnia but in the book they were stone. Also in the last battle the movie portrayed the witch as the ultimate fighting machine who was unstoppable and killing everyone but in the book she didn’t come to the fight until the end an she only tried to kill Peter. Also at 1:45 movie time you see the beavers telling the children of the prophecy when in the book Aslant revealed this to them. Other than that the movie and the book had the same things in common the authors point was never really lost due to the fact that this author past years ago but his stories an legacy live on an were portrayed well in the movie. ? How to cite Chronicles of Narnia, Papers

Phstat free essay sample

For Excel 2000 through Excel 2003, Microsoft Office macro security level set to Medium (see Topic 3a â€Å"Configuring Excel 2000-2003 Security for PHStat2†). For Excel 2007, Trust Center Macro Settings set to Disable all macros with notification (recommended) or Enable all macros. See section 3a or 3b for more details. (There are no security settings in Excel 97 or the original, unpatched version of Excel 2000. ) Internet access (for downloading updates to Microsoft Excel, from www. microsoft. com, and PHStat2, from www. prenhall. com/phstat, as they become available), optional but recommended. Requirements for running the PHStat2 setup program: CD or DVD drive. Approximately 10 MB hard disk free space while running the setup program and 3 MB hard disk space after program setup. On some older systems, the Windows system files that may get replaced or added during the setup process will require up to 6 MB additional hard disk space. Windows user account with administrator or software-installing privileges (does not apply to Windows 98Se or ME). We will write a custom essay sample on Phstat or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Student or faculty accounts used to login onto networked computers in academic settings typically do not have this privilege. F Test for Differences in Two Variances: Two-tailed test formula to determine whether to reject null hypothesis corrected. Z Test for Differences in Two Means: Upper-tail test formula to determine whether to reject null hypothesis corrected. Minor reformatting in selected worksheet and dialog box labels. Enhanced statistical procedures in version 2. 5: Chi-Square Test includes Marascuilo Procedure output option. Histogram Polygons Frequency distributions include percentage and cumulative percentage columns. Kruskal-Wallis Rank Test Worksheet redesigned to accommodate larger number of groups.