Equity Portfolio Mgmt Study Notes
EQT
Chapter 11
Technical analysis
* Relative strength approach where recent performance is presumably continued into the future * Resistance levels / support level where many investors have taken up positions and therefore have as a baseline reference under/over which they are not willing to trade. May also relate to absolute numbers such as 100 * Weak-form EMH implies that technical analysis is of no use * Technical analysis is highly self-destructing, as fortunate strategies ought to erode the opportunities. For instance, resistance levels (if believed in by everybody) would gradually shift and not matter any longer
Fundamental analysis
* Only profitable in case your estimate is better than everyone else's estimate. You have to find firms where the current estimates are off
Active versus Passive portfolio mgmt
* Active management may only be profitable for high net worth portfolios, as transaction and management costs may take away much of the gains for smaller portfolios * Passive management generally restricted to index funds and ETF's * Hybrid strategies relatively common, where funds have a passive core and add-on alpha portfolios
The role of portfolio management in an efficient market
* Portfolios nevertheless need diversification to eliminate firm-specific (non-systematic) risk and the portfolio manager may achieve this * Tax considerations may force investors to tilt against either dividend gains or capital gains * Executives may have high exposure to their industry due to stock/option programmes and do not need more exposure to the same risk source * Managing different risk exposure, depending on preference and age * Rather than beating the market, it is a question of tailoring the profile
11:3 Event studies
* Describes the technique of empirical financial research to assess the impact of a particular event on a firm's share price. E.g. dividend changes, news release
Chapter 11
Technical analysis
* Relative strength approach where recent performance is presumably continued into the future * Resistance levels / support level where many investors have taken up positions and therefore have as a baseline reference under/over which they are not willing to trade. May also relate to absolute numbers such as 100 * Weak-form EMH implies that technical analysis is of no use * Technical analysis is highly self-destructing, as fortunate strategies ought to erode the opportunities. For instance, resistance levels (if believed in by everybody) would gradually shift and not matter any longer
Fundamental analysis
* Only profitable in case your estimate is better than everyone else's estimate. You have to find firms where the current estimates are off
Active versus Passive portfolio mgmt
* Active management may only be profitable for high net worth portfolios, as transaction and management costs may take away much of the gains for smaller portfolios * Passive management generally restricted to index funds and ETF's * Hybrid strategies relatively common, where funds have a passive core and add-on alpha portfolios
The role of portfolio management in an efficient market
* Portfolios nevertheless need diversification to eliminate firm-specific (non-systematic) risk and the portfolio manager may achieve this * Tax considerations may force investors to tilt against either dividend gains or capital gains * Executives may have high exposure to their industry due to stock/option programmes and do not need more exposure to the same risk source * Managing different risk exposure, depending on preference and age * Rather than beating the market, it is a question of tailoring the profile
11:3 Event studies
* Describes the technique of empirical financial research to assess the impact of a particular event on a firm's share price. E.g. dividend changes, news release