Active Portfolio Management Portfolio Construction

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Active Portfolio Management Portfolio Construction

Show simple item record Hilsted, Johan Christian 2013-09-12T09:33:21Z 2013-09-12T09:33:21Z 2013-09-12
dc.description.abstract This thesis aims at creating an investment strategy for active portfolio management to outperform the MSCI Denmark from 1992 to 2011. The index development of the Danish stock market has been quite impressive as it has performed remarkably better than other national indices. It is therefore interesting to investigate whether active portfolio management constitutes a winning strategy superior to investing in the MSCI Denmark. There is no generally accepted approach to conduct active portfolio management. This thesis approaches the subject by comparing two internationally diversified portfolios to the MSCI Denmark as benchmark - one portfolio submitted to a 20% maximum asset representation restriction, the other portfolio left unrestricted. From investment strategy we conclude that combining strategic and tactical asset allocation constitutes an appropriate investment strategy for active portfolio management, as it limits the long-term portfolio investment opportunities and allows for short-term portfolio repositioning. The information ratio constitutes the performance measure of active portfolio management, as it optimizes portfolio construction by comparing expected returns of portfolio and benchmark – the residual return. The Capital Assets Pricing Model (CAPM) was utilized for return estimations for both investment opportunities and benchmark. Mean-variance portfolio construction was conducted based upon investment opportunities expected to outperform the benchmark. The MSCI Denmark provides realized average monthly return of 0,65%, while the actively managed portfolios produce average realized monthly return of 0,34% and 0,37%, respectively. In that regard, active portfolio management has not outperformed the benchmark, and statistical findings cannot suggest portfolio timing skill. However, considering the systematic risk adjusted return, both portfolios yield significant alpha, or value added, with the unrestricted portfolio being the best performing portfolio. In conclusion, active portfolio management cannot produce higher return than the MSCI Denmark, but has proven to benefit the investor, as the market risk exposure justifies both inferior and superior portfolio return to the benchmark. en_US
dc.format.extent 118 s. en_US
dc.language eng en_US
dc.subject.other Kandidatafhandlinger en_US
dc.title Active Portfolio Management Portfolio Construction en_US
dc.type mop en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.corporationshort Department of Accounting and Auditing. AA en_US
dc.contributor.corporationshort Institut for Regnskab og Revision. RR en_US
dc.contributor.department MSc in Economics & Business Administration en_US
dc.contributor.departmentshort 22 en_US
dc.description.notes Cand.merc.aef. Applied Economics and Finance en_US
dc.publisher.year 2012 en_US Frederiksberg en_US
dc.title.subtitle Implementing an Investment Strategy en_US

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