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Security Analysis and Portfolio Management
Finance & Accounting
Pages 10 (2510 words)
Name: Tutor: Course: Date: University: Absolute Returns and Relative Performance in Investment Management Investment management refers to professional asset management aimed at meeting the specified investment goals. Establishment of the performance of investment can be challenging…
358). For the stock market perspective, the absolute investment returns are gaining more fame lately due to the start of mutual funds aiming at absolute return objectives. In contrast, traditional mutual fund aims at producing smart relative investment returns as compared to the suitable benchmark. Absolute returns facilitate profitability in most periods and acts over an extensive range of market conditions. Beta measure reduces the risks during the determination of return and risk on stocks and portfolios. Use of beta coefficient in stock selection requires comparison with the market. The investor, therefore, construct the portfolio by drawing the relationship between beta coefficient and the prevailing market prices. Betas carry with them high risks, and markets with negative betas may withstand the fluctuations in market prices. Despite betas helping in stock selection, its effectiveness assumes that movement in the market requires careful analysis of positive and negative directions. Also, beta approach assumes analysis of historical considerations for future prediction. As a result, when portfolio selection fails in accurate reading of the market movements, the resulting portfolio selection is incorrect. This method requires a high degree of precision. On the other hand, the alpha parameter indicates the return on security at zero market return. ...
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