Tài chính doanh nghiệp - Chapter 27: The theory of active portfolio management
Are markets totally efficient? Some managers outperform the market for extended periods. While the abnormal performance may not be too large, it is too large to be attributed solely to noise. Evidence of anomalies such as the turn of the year exist. The evidence suggests that there is some role for active management.
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Chapter 27The Theory of Active Portfolio ManagementLure of Active ManagementAre markets totally efficient?Some managers outperform the market for extended periods.While the abnormal performance may not be too large, it is too large to be attributed solely to noise.Evidence of anomalies such as the turn of the year exist.The evidence suggests that there is some role for active management.Market TimingAdjust the portfolio for movements in the market.Shift between stocks and money market instruments or bonds.Results: higher returns, lower risk (downside is eliminated).With perfect ability to forecast behaves like an option.rfrfrMReturn of a Perfect Market TimerReturns from 1990 - 1999YearLg StocksT-Bills1990-3.207.86199130.665.6519927.713.5419939.872.9719941.293.91199537.715.58199623.075.58199733.175.08199828.585.11199921.044.80With Perfect Forecasting AbilitySwitch to bills in 1990 and 1994Mean =20.12% Standard Deviation = 12.51%Invested in large stocks for the entire periodMean =18.99% Standard Deviation =14.21%The results are clearly related to the periodWith Imperfect Ability to ForecastLong horizon to judge the abilityJudge proportions of correct callsBull markets and bear market callsSuperior Selection AbilityConcentrate funds in undervalued stocks or undervalued sectors or industries.Balance funds in an active portfolio and in a passive portfolio.Active selection will mean some unsystematic risk.Treynor-Black Model Model used to combine actively managed stocks with a passively managed portfolio.Using a reward-to-risk measure that is similar to the the Sharpe Measure, the optimal combination of active and passive portfolios can be determined.Treynor-Black Model: AssumptionsAnalysts will have a limited ability to find a select number of undervalued securities.Portfolio managers can estimate the expected return and risk, and the abnormal performance for the actively-managed portfolio.Portfolio managers can estimate the expected risk and return parameters for a broad market (passively managed) portfolio.Reward to Variability MeasuresPassive Portfolio : Appraisal Ratio:Reward to Variability MeasuresReward to Variability MeasuresCombined Portfolio : Treynor-Black AllocationMAPE(r)CMLCALRfSummary Points: Treynor-Black ModelSharpe Measure will increase with added ability to pick stocks.Slope of CAL>CML(rp-rf)/p > (rm-rf)/pP is the portfolio that combines the passively managed portfolio with the actively managed portfolio.The combined efficient frontier has a higher return for the same level of risk.
