Investment Portfolio Selection and Performance Measurement

Business & Finance, Finance & Investing, Banks & Banking
Cover of the book Investment Portfolio Selection and Performance Measurement by Patrick Daum, GRIN Verlag
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Author: Patrick Daum ISBN: 9783656190578
Publisher: GRIN Verlag Publication: May 14, 2012
Imprint: GRIN Verlag Language: English
Author: Patrick Daum
ISBN: 9783656190578
Publisher: GRIN Verlag
Publication: May 14, 2012
Imprint: GRIN Verlag
Language: English

Seminar paper from the year 2011 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, South Bank University London (Business Faculty), course: Fondmanagement , language: English, abstract: Die Arbeit legt die Portfoliotheorie an Hand eine praktischen Beispiels dar. Auf der Basis von 10 Stocks aus dem FTSE 100 wird das optimale Portfolio errechnet und dessen Performance eingeordnet. ++++ According Warren Buffett, financial investors should never purchase a security, if they cannot accept that the value might be cut in half (Schömann-Finck, 2010). One of the most successful global investors has illustrated with this quote the risks involved in the business of financial investments. In order to optimize risk-return tradeoffs, scientific research has developed efficient diversification techniques. This paper examines the process of portfolio diversification based on a sample of 10 randomly selected securities. First the optimal portfolio is identified in order to evaluate its performance against the market trend via industry accepted benchmarking comparison tools in a second step. Finally, potential portfolio gains, achieved via diversification across additional asset classes, are discussed and evaluated. According to Bodie et al. (2008) the investment decision process can be separated into three major steps (see figure 1): Capital Allocation, Asset Allocation and Security Selection. For the purpose of this paper 100% of the available funds are assumed to be allocated into stocks. The portfolio created (see figure 2) consists of 10 randomly selected securities taken from the FTSE 100 index.

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Seminar paper from the year 2011 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, South Bank University London (Business Faculty), course: Fondmanagement , language: English, abstract: Die Arbeit legt die Portfoliotheorie an Hand eine praktischen Beispiels dar. Auf der Basis von 10 Stocks aus dem FTSE 100 wird das optimale Portfolio errechnet und dessen Performance eingeordnet. ++++ According Warren Buffett, financial investors should never purchase a security, if they cannot accept that the value might be cut in half (Schömann-Finck, 2010). One of the most successful global investors has illustrated with this quote the risks involved in the business of financial investments. In order to optimize risk-return tradeoffs, scientific research has developed efficient diversification techniques. This paper examines the process of portfolio diversification based on a sample of 10 randomly selected securities. First the optimal portfolio is identified in order to evaluate its performance against the market trend via industry accepted benchmarking comparison tools in a second step. Finally, potential portfolio gains, achieved via diversification across additional asset classes, are discussed and evaluated. According to Bodie et al. (2008) the investment decision process can be separated into three major steps (see figure 1): Capital Allocation, Asset Allocation and Security Selection. For the purpose of this paper 100% of the available funds are assumed to be allocated into stocks. The portfolio created (see figure 2) consists of 10 randomly selected securities taken from the FTSE 100 index.

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