Asset Management Assignment
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Added on 2020-05-01
Asset Management Assignment
Added on 2020-05-01
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Running head: ASSET MANAGEMENT 1Asset ManagementName:Institution:Date:
ASSET MANAGEMENT2Investment PhilosophyAt ABC Asset management, market forces are the determinants of security selection. We believe that for a market to be efficient at all costs, the biases of the individual investor will greatly and fundamentally impact on the security of a company selection. The core believe of ABC Asset management is that an investor will always react in an irrational way or manner to influence the market price given new availability of information relation to any asset[ CITATION Fis151 \l 1033 ]. The investor will become susceptible and unconscious anchoring that is brought about by market prices to floors and ceilings.Inefficiencies in the market results in a stock being either undervalued or overvalued and at ABC Asset management we believe that there has been too much emphasis placed on share price and its performance to the detriment of the real and true valuation of the stock of the company[ CITATION Jeg93 \l 1033 ].We implement the strategies of asset management due to these factors that affect the stock price. Both momentum and investment value are the strategies that inefficiencies create within the market.The strategies help in identifying the stocks that have been undervalued or overvalued and we help the investor to make a prudent decision while investing.At ABC Asset management, identifying the undervalued and overvalued assets or stocks by our team help to make a decision that will be used by the investors in producing market returns that areabove the buying price of the investor. Strategies and investment philosophies should always be used to give a better return to an investor or to manage the expectation of the investor in case of losses. However, at ABC Asset management, it is our duty to use investing philosophies that will eventually lead to good returns (Sharpe, 1992).Investment Philosophy and Asset Management
ASSET MANAGEMENT3The investment strategies that we use at ABC Asset management are momentum and value investing to goal of producing the greatest profit from our investing endevours. For ABC asset management we are able to use signals in the market that are identified by the two strategies. ABC asset management uses knowledge that we get from the two strategies to invest by allowing us to use negative information signals from the market [ CITATION Jeg93 \l 1033 ]. The two strategies enables us as ABC asset management to be exposed to all information that is currently available in the market to be able to make better investment decisions. The company invests in securities which based on past performance will have momentum to carry them into the subsequent months. Momentum premium notion is what we focus on to outperform the market[ CITATION Fis151 \l 1033 ]. To be specific, we target stocks which are 52 week high or close at that particular time. Traders use the 52 week high as a point of reference in which they evaluate what would be the impact of any news on the securities (Sharpe, 1992)By investing on the top 25% of securities, we exploit the less perfect market conditions created by the unwillingness by investors to breach the 52 week high. The choice by ABC asset management to use momentum analysis is based on the evidence found (Sharpe, 1992), which relates to the efficacy of the 52 week high portfolio and the momentum premium. The momentum premium suggests that on average those who win realized returns that were significantly higher as compared to the market. It also suggests that that abnormal returns were only short lived, with over half of the securities returns dissipating in the two years that follows. Therefore, as ABC asset management, we carry out annual rebalancing to minimize or avoid the possibility of making significant loss over the years following the development of the portfolio. On average, there was a monthly average of 1.24% in terms of returned monthly wage for the 52 week high portfolio, which is much greater than the JT portfolio that returned an average of 0.97% and MG portfolio which returned a monthly
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