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Investment philosophy: Passive versus active management
One of the most common debates in modern investment philosophy revolves around whether
active management of equities is efficient or investors should be advised to passively
manage their portfolios. Investors have realized that traditional investment vehicles become
increasingly risky when the markets take a rollercoaster ride. The traditional long only
investment styles gets handcuffed in volatile market as neither it safeguards the investments
nor is able to take the advantage of the short side of the market. Addressing this issue, we
introduce quantitative concept of co-integration based optimization that deals with issues
such as:
A classic index tracking strategy
A long-short equity market neutral strategy
By using the co-integration based classic index tracking strategy, portfolio managers (PMs)
can replicate a benchmark in terms of returns and volatility. With the long-short equity
market neutral strategy, PMs can seek to minimize volatility and generate steady returns
under all market circumstances. Combination of both could enable PMs to enhance the
properties of basic strategies.
Various portfolio enhancement strategies
Investors and PMs always quest to achieve optimal returns by enhancing the portfolio
through various strategies. The spectrum of such strategies is boundless. Each portfolio has
its unique characteristics and, hence, the strategy has to be unique. Few of the enhancement
strategies are:
Co-integration optimization approach
Statistical long/short market neutral strategy
Enhance indexing
Leveraging and structured instruments
Superior stock selection
The idea of using enhancement strategies is either to outperform the benchmark what we
call Alpha over market or use these strategies to derive consistent returns with minimum
volatility i.e. the absolute return strategy. Enhanced indexing aims at gaining alpha over the
benchmark whereas long-short market neutral strategies are used for absolute returns. Cointegrating
optimization helps us achieve the best of both worlds.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment philosophy: Passive versus active management
One of the most common debates in modern investment philosophy revolves around whether
active management of equities is efficient or investors should be advised to passively
manage their portfolios. Investors have realized that traditional investment vehicles become
increasingly risky when the markets take a rollercoaster ride. The traditional long only
investment styles gets handcuffed in volatile market as neither it safeguards the investments
nor is able to take the advantage of the short side of the market. Addressing this issue, we
introduce quantitative concept of co-integration based optimization that deals with issues
such as:
A classic index tracking strategy
A long-short equity market neutral strategy
By using the co-integration based classic index tracking strategy, portfolio managers (PMs)
can replicate a benchmark in terms of returns and volatility. With the long-short equity
market neutral strategy, PMs can seek to minimize volatility and generate steady returns
under all market circumstances. Combination of both could enable PMs to enhance the
properties of basic strategies.
Various portfolio enhancement strategies
Investors and PMs always quest to achieve optimal returns by enhancing the portfolio
through various strategies. The spectrum of such strategies is boundless. Each portfolio has
its unique characteristics and, hence, the strategy has to be unique. Few of the enhancement
strategies are:
Co-integration optimization approach
Statistical long/short market neutral strategy
Enhance indexing
Leveraging and structured instruments
Superior stock selection
The idea of using enhancement strategies is either to outperform the benchmark what we
call Alpha over market or use these strategies to derive consistent returns with minimum
volatility i.e. the absolute return strategy. Enhanced indexing aims at gaining alpha over the
benchmark whereas long-short market neutral strategies are used for absolute returns. Cointegrating
optimization helps us achieve the best of both worlds.
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