scholarly journals Portfolio performance under tracking error and benchmark volatility constraints

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jan Frederick Hausner ◽  
Gary van Vuuren
Keyword(s):  
Absolute Risk ◽  
Tracking Error ◽  
Portfolio Performance ◽  
Portfolio Risk ◽  
Expected Return ◽  
Treasury Bills ◽  
Content Type ◽  
Benchmark Portfolio ◽  
High Volatility ◽  
First Time

Purpose Using a portfolio comprising liquid global stocks and bonds, this study aims to limit absolute risk to that of a standardised benchmark and determine whether this has a significant impact on expected return in both high volatility period (HV) and low volatility period (LV). Design/methodology/approach Using a traditional benchmark comprising 40% equity and 60% bonds, a constant tracking error (TE) frontier was constructed and implemented. Portfolio performance for different TE constraints and different economic periods (expansion and contraction) was explored. Findings Results indicate that during HV, replicating benchmark portfolio risk produces portfolios that outperform both the maximum return (MR) portfolio and the benchmark. MR portfolios outperform those with the same risk as that of the benchmark in LV. The MR portfolio weights assets to obtain the highest return on the TE frontier. During HV, the benchmark replicated risk portfolio obtained a higher absolute risk value than that of the MR portfolio because of an inefficient benchmark. In HV, the benchmark replicated risk portfolio favoured intermediate maturity treasury bills. Originality/value There is a dearth of literature exploring the performance of active portfolios subject to TE constraints. This work addresses this gap and demonstrates, for the first time, the relative portfolio performance of several standard portfolio choices on the frontier.

Asset management with TEV and VaR constraints: the constrained efficient frontiers

2019 ◽  
Vol 36 (4) ◽  
pp. 492-516 ◽  
Author(s):  
Giulio Palomba ◽  
Luca Riccetti
Keyword(s):  
Risk Management ◽  
Asset Management ◽  
Value At Risk ◽  
Absolute Risk ◽  
Tracking Error ◽  
Portfolio Risk ◽  
Content Type ◽  
Maximum Variance ◽  
Portfolio Efficiency ◽  
Asset Managers

Purpose This paper aims to perform an analytical analysis on portfolio allocation when a tracking error volatility (TEV) constraint holds, drawing specific attention to the portfolio efficiency issue. Indeed, it is well known that investors can assign part of their funds to asset managers who are given the task of beating a benchmark portfolio. However, the risk management office often imposes a TEV constraint to the asset managers’ activity to maintain the portfolio risk near to the risk of the benchmark. This situation could lead asset managers to select non efficient portfolios in the total return and absolute risk perspective. However, the risk management office can impose further constraints, such as on maximum variance or maximum value at risk (VaR) to maintain the overall portfolio risk under control. Design/methodology/approach First the authors define the TEV constrained-efficient frontier (ECTF), a set of TEV constrained portfolios that are mean–variance efficient. Second, they define two new portfolio frontiers analyzing how the imposition of a maximum variance or maximum VaR restriction can reduce the ECTF. Third, they investigate the feasibility of such portfolio frontiers and their relationships. Findings The authors find that variance or VaR constraint can force asset managers to pursue portfolio efficiency. Originality/value This is a practically important issue given that asset managers often receive a constraint on TEV from the risk management office, but the risk management office does not ask them to minimize the TEV as often assumed in the optimizations performed in the literature on this topic.

Large-cap vs small-cap portfolio performance: new empirical evidence from ETFs

2019 ◽  
Vol 18 (1) ◽  
pp. 71-94
Author(s):  
Gerasimos Rompotis
Keyword(s):  
Design Methodology ◽  
Portfolio Performance ◽  
Exchange Traded Funds ◽  
Investment Strategies ◽  
Time Data ◽  
Content Type ◽  
Risk Characteristics ◽  
The Usa ◽  
First Time ◽  
Practical Implications

PurposeA well-documented pattern in the literature concerns the outperformance of small-cap stocks relative to their larger-cap counterparts. This paper aims to address the “small-cap versus large-cap” issue using for the first time data from the exchange traded funds (ETFs) industry.Design/methodology/approachSeveral raw return and risk-adjusted return metrics are estimated over the period 2012-2016.FindingsResults are partially supportive of the “size effect”. In particular, small-cap ETFs outperform large-cap ETFs in overall raw return terms even though they fail the risk test. However, outperformance is not consistent on an annual basis. When risk-adjusted returns are taken into consideration, small-cap ETFs are inferior to their large-cap counterparts.Research limitations/implicationsThis research only covers the ETF market in the USA. However, given the tremendous growth of ETF markets worldwide, a similar examination of the “small vs large capitalization” issue could be conducted with data from other developed ETF markets in Europe and Asia. In such a case, useful comparisons could be made, so that we could conclude whether the findings of the current study are unique and US-specific or whether they could be generalized across the several international ETF markets.Practical implicationsA possible generalization of the findings would entail that profitable investment strategies could be based on the different performance and risk characteristics of small- and large-cap ETFs.Originality/valueThis is the first study to examine the performance of ETFs investing in large-cap stock indicesvis-à-visthe performance of ETFs tracking indices comprised of small-cap stocks.

Stockholdings of first-time and more experienced investors

2018 ◽  
Vol 10 (2) ◽  
pp. 146-162
Author(s):  
Kent Baker ◽  
Adri De Ridder ◽  
Annalien De Vries
Keyword(s):  
Individual Investors ◽  
Portfolio Performance ◽  
Economic Factors ◽  
Defined Contribution ◽  
Data Set ◽  
Content Type ◽  
Portfolio Returns ◽  
Portfolio Composition ◽  
First Time ◽  
Socio Economic Factors

Purpose The purpose of this paper is to examine whether socio-economic factors influence portfolio composition of individual investors investing in stocks for the first time and how these factors relate to stock portfolio performance. Design/methodology/approach The study uses cross-sectional time-series analysis to examine a unique and detailed data set of Swedish stockholdings. Findings The results show that first-time investors do not hold diversified portfolios. They experience high market risk and, on average, underperform more experienced investors. Males have higher unsystematic risk in their portfolios than females and older investors have more diversified portfolios compared to younger investors. Research limitations/implications The results show that individual investors should improve their insights by incorporating risk when investing in stocks. Practical implications Given the results of this paper, the movement from defined benefit to defined contribution pension schemes in many countries raises the issue of the need to better understand and monitor the risks in stock portfolios. Originality/value This study provides insights into whether socio-economic factors influence portfolio composition, the extent to which socio-economic factors and portfolio characteristics relate to portfolio returns, and whether portfolio performance between first-time and more experienced investors differs.

ANALISIS PORTOFOLIO INVESTASI PADA SAHAM LQ45 DENGAN METODE MEAN VARIAN SATU KONSTRAIN

Jurnal Varian ◽  
2018 ◽  
Vol 1 (2) ◽  
pp. 22-29
Author(s):  
Gilang Primajati
Keyword(s):  
Capital Markets ◽  
Minimum Variance ◽  
Return Rate ◽  
Optimal Portfolio ◽  
Portfolio Diversification ◽  
Portfolio Risk ◽  
Expected Return ◽  
Positive Weight ◽  
The Mean

In the capital markets, especially the investment market, the establishment of a portfolio is something that must be understood by investors. Portfolio formation by investors to maximize profits as much as possible by minimizing the risk of losses that may occur. Portfolio diversification is defined as portfolio formation in such a way that it can reduce portfolio risk without sacrificing returns. Optimal portfolio with efficient-portfolio mean criteria, investors only invest in risk assets only. Investors do not include risk free assets in their portfolios. The efficient variance portfolio is defined as a portfolio that has minimum variance among the overall possible portfolio that can be formed, at the same expected return rate. The mean method of one constraint variant can be used as the basis for optimal portfolio determination. The shares of LQ-45 used are shares of AALI, BBCA, UNVR, TLKM and ADHI. AALI shares received a positive weight of 7%, BBCA 48%, UNVR 16%, TLKM 26% and ADHI 3%

ANALISIS PORTOFOLIO OPTIMAL DENGAN MENGGUNAKAN MODEL INDEKS TUNGGAL PADA SAHAM IDX BUMN20 DI BURSA EFEK INDONESIA JANUARI 2018-JANUARI 2019

2019 ◽  
Vol 4 (2) ◽  
Author(s):  
Mochamad Andik Firmansyah
Keyword(s):  
Stock Exchange ◽  
Optimal Portfolio ◽  
Rate Of Return ◽  
Portfolio Risk ◽  
Expected Return ◽  
Purposive Sampling ◽  
Single Index ◽  
Index Model ◽  
Market Return ◽  
Single Index Model

Penelitian ini bertujuan untuk menentukan level of expected return dan the best risk of optimal portfolio  formation dengan menggunakan Single Index Model pada saham IDX BUMN 20 yang tercatat di Indonesia Stock Exchange dari bulan Januari 2018 sampai January 2019. Saham IDX BUMN 20 yang tercatat di Indonesia Stock Exchange dengan populasi sebanyak 20 perusahaan. Dengan menggunakan populasi sebesar 20 perusahaan maka peneliti menggunakan purposive sampling, dan ternyata hanya 18 perusahaan saja yang ditemukan memenuhi kriteria penelitian ini. Penelitian ini juga menggunakan metode Kuantitatif Deskriptif. Analisa data pada penelitian ini untuk menentukan saham-saham mana saja yang termasuk the optimal portfolio, dan juga the level of proportion of 1 funds yang termasuk juga dalam kategori the optimal portfolio dan the level of expected return serta the best risk of the optimal portfolio yang terbentuk dengan menggunakan Single Index Model. Hasil dari penelitian ini menunjukan bahwa terdapat 5 perusahaan dengan kategori the optimal portfolio dari 18 sampel perusahaan pada saham IDX BUMN 20 dengan tingkat tertinggi dari level of proportion of 1 funds ditemukan pada PTBA share sat 1.89333 or 189,333%, di lain pihak dengan tingkat terendah adalah pada TLKM shares at -2.13488 or -213.488% yang berarti bahwa saham TLKM adalah negatif dan harus dijual dalam jangka waktu pendek sebesar 213,488% dari dana yang dimiliki oleh para inventor dan menghasilkan rate of return yang diharapkan dari formasi optimal portfolio sebesar 0.17583 or 17.583% lebih tinggi dari yang diharapkan oleh market return sebesar 0.00264 or 0.264% dan memiliki tingkat portfolio risk borne sebesar 0.10384 or 10,384%, lebih kecil dari the risk of market sebesar 0.03367 or 3,367% dan beta market sebesar 1.Kata Kunci : Portfolio, Optimal Portfolio, Single Index Model.

Conference report: innovation, interaction … and a lot of data: first time reflections on Internet Librarian International, UK 2018

2019 ◽  
Vol 36 (2) ◽  
pp. 21-22
Author(s):  
Ray Harper
Keyword(s):  
Best Practice ◽  
New Technologies ◽  
Conference Report ◽  
Library Services ◽  
New Techniques ◽  
Content Type ◽  
Making A Difference ◽  
Analyse Data ◽  
Physical Spaces ◽  
First Time

Purpose The purpose of this paper is to summarise a number of presentations at Day 1 of the Internet Librarian International conference, London, UK (16 October 2018). This was the 20th conference in the series, and the three key themes included were the next-gen library and librarian; understanding users, usage and user experience; and inclusion and inspiration: libraries making a difference. Design/methodology/approach This paper reports from the viewpoint of a first-time attendee of the conference. This summarises the main issues raised by each presentation and draws out the key learning points for practical situations. Findings The conference covered a variety of practical ways in which libraries can use technology to support users and make decisions about services. These include developing interactive physical spaces which include augmented reality; introducing “chat-bots” to support users; using new techniques to analyse data; and piloting new ways to engage users (such as coding clubs). A key theme was how we use and harness data in a way that is ethical, effective and relevant to library services. Originality/value This conference focussed on practical examples of how library and information services across sectors and countries are innovating in a period of huge change. The conference gave delegates numerous useful ideas and examples of best practice and demonstrated the strength of the profession in adapting to new technologies and developments.

Interest rate option hedging portfolios without bank account

2019 ◽  
Vol 37 (1) ◽  
pp. 134-142
Author(s):  
Alberto Bueno-Guerrero
Keyword(s):  
Design Methodology ◽  
Contingent Claim ◽  
Necessary And Sufficient Condition ◽  
Barrier Option ◽  
Bank Account ◽  
Content Type ◽  
Option Hedging ◽  
Hedging Portfolio ◽  
Necessary And Sufficient ◽  
First Time

Purpose This paper aims to study the conditions for the hedging portfolio of any contingent claim on bonds to have no bank account part. Design/methodology/approach Hedging and Malliavin calculus techniques recently developed under a stochastic string framework are applied. Findings A necessary and sufficient condition for the hedging portfolio to have no bank account part is found. This condition is applied to a barrier option, and an example of a contingent claim whose hedging portfolio has a bank account part different from zero is provided. Originality/value To the best of the authors’ knowledge, this is the first time that this issue has been addressed in the literature.

scholarly journals A Markov-Switching VSTOXX Trading Algorithm for Enhancing EUR Stock Portfolio Performance

Mathematics ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 1030
Author(s):  
Oscar V. De la Torre-Torres ◽  
Evaristo Galeana-Figueroa ◽  
José Álvarez-García
Keyword(s):  
Markov Switching ◽  
Stock Index ◽  
Portfolio Performance ◽  
Trading Costs ◽  
Weighting Method ◽  
Treasury Bills ◽  
Markov Switching Models ◽  
Switching Models ◽  
Asset Portfolio ◽  
Stock Portfolio

In the present paper, we test the benefit of using Markov-Switching models and volatility futures diversification in a Euro-based stock portfolio. With weekly data of the Eurostoxx 50 (ESTOXX50) stock index, we forecasted the smoothed regime-specific probabilities at T + 1 and used them as the weighting method of a diversified portfolio in ESTOXX50 and ESTOSS50 volatility index (VSTOXX) futures. With the estimated smoothed probabilities from 9 July 2009 to 29 September 2020, we simulated the performance of three theoretical investors who paid different trading costs and invested in ESTOXX50 during calm periods (low volatility regime) or VSTOXX futures and the three-month German treasury bills in distressed or highly distressed periods (high and extreme volatility regimes). Our results suggest that diversification benefits hold in the short-term, but if a given investor manages a two-asset portfolio with ESTOXX50 and our simulated portfolios, the stock portfolio’s performance is enhanced significantly, in the long term, with the presence of trading costs. These results are of use to practitioners for algorithmic and active trading applications in ESTOXX50 ETFs and VSTOXX futures.

A “Learning from Action” workshop in Japan

2019 ◽  
Vol 40 (2) ◽  
pp. 77-83
Author(s):  
Robert Douglas Hinshelwood ◽  
Luca Mingarelli ◽  
Simona Masnata
Keyword(s):  
Far East ◽  
Opportunity To Learn ◽  
Content Type ◽  
Work Activities ◽  
Defensive Role ◽  
Feedback Data ◽  
Experiential Workshop ◽  
First Time ◽  
Practical Implications

Purpose Many people in severe mentally disturbed states do not use language or other symbolic media well or coherently. Therefore, the non-verbal medium needs to be understood by workers with such people. The “Learning from Action” experiential workshop was developed in order to provide an opportunity to learn about hidden messages in the relationships and roles occurring in activities. In August 2017, a workshop was run for the first time in Japan. The purpose of this paper is to report the experience and dynamics observed by the three consultants, who are here the authors of this paper. Design/methodology/approach After the workshop all the staff and members, including interpreters, were invited to give feedback. Findings Analysis of the feedback data showed certain important dynamics, concerning especially dependence, cultural defences and the defensive role of activity in a multicultural context. Research limitations/implications This is an initial experience to be followed up by later feedback and further workshops. Practical implications Workers awareness of non-verbal communication within the roles of work activities is a training possibility. It faces various resistances including the mental health assumptions of meaninglessness of any communication outside the verbal. Originality/value This is a method of training not widely used even in European countries, and is the first in a country in the far east.

Whirling in between the personal and the impersonal

2019 ◽  
Vol 25 (2) ◽  
pp. 257-284
Author(s):  
Armen E. Petrosyan
Keyword(s):  
Organization Theory ◽  
Conceptual Analysis ◽  
Essential Elements ◽  
Organizational Life ◽  
Critical Perspective ◽  
Content Type ◽  
Organizational Goals ◽  
Last Stage ◽  
First Time ◽  
Current Paradigm

Purpose The paper aims to present a systematic conceptual analysis of the problem of organizational goal and to reduce the insights into it provided by the main conceptions taken in their development from one to another, to break out of the ruling paradigm and outline a new solution. Design/methodology/approach The study has been carried out from the historical and critical perspective. Findings The paper discovers the logic of the evolution the approaches to organizational goals have undergone and portrays it in a matrix form in the heart of which is the “zigzag effect”: each posterior stage returns to the essential elements rejected by those preceding it, and the last stage, being diametrically opposite to the first, is, at that, as well as the latter, akin to the intermediate stages. The opportunities afforded by the current paradigm have been exhausted and it seems to run to an impasse. Instead, the author suggests a new frame of orientation: organizational goals are closely interknit with personal, but not reducible to them and bear fundamentally transpersonal character, while the mechanism of involving the preferences of individuals and groups in goal-setting is based on the self-contained interests of the organization they pertain to. Research limitations/implications The findings, conclusions and generalizations obtained can serve for a necessary ground to researchers getting deeper into the essence of what bonds organizational life and activity. Practical implications The material empowers practitioners to comprehend the difficulties of framing cohesive goal and find efficient ways to overcome them. It is of value also to the teachers seeking to present a more exact and elaborate view of teleological foundations of management and organization theory. Originality/value Both the conceptual analysis of the evolution of the approaches to organizational goals and the author’s exposition of its logic and vision of their nature are provided for the first time.

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