For portfolio managers to experience positive returns they should be able to cover their expenses and costs of trading. Ian Domowitz, Jack Glenand Ananth Madhavan 2001 state that Investment performance reflects two factors 1. The underlying investment strategy of the portfolio manager 2. The execution costs incurred in realizing those objectives Donald B. Keim and Ananth Madhavan 1998 further state that there are two types of costs namely explicit and implicit costs also mentioned in Ian Domowitz, Jack Glenand Ananth Madhavan’s 2001 paper. Explicit Costs “Explicit costs are the direct costs of trading, such as broker commissions and taxes. Implicit costs represent such costs as the price impact of the trade and the opportunity cost of failing to execute in a timely manner.” Explicit cots are usually easily ascertainable from accounting records. These expenses involve management fees, which are considerably higher for actively managed funds (Burton G. Malkiel 2003). Actively managed portfolios in the USA usually have expense ratios of 140 basis points. Passively managed portfolios ...
Student Answer: Professional management and diversification are the major reasons investors purchase mutual funds, as well as they are easy to invest in for beginning investors or those who lack large amount of money as required by other types of investments. Investment companies are employed with experienced and profession fund managers who research and devote a lot of time to finding the perfect securities for their investment portfolios. The diversification allows for gains, even in a loss, because one investment in a mutual fund can offset the loss of another by it’s gains. Basically, your investments are scattered around and offer somewhat of a safety net for your
If done right, I believe that all of the costs can be allocated to each of the three products through both direct and overhead costs. The only direct costs that are being included currently are labor and manufacturing costs. I broke up overhead into overhead based off direct labor and overhead based on units sold.
Roybal, H., Baxendale, S.J., and Gupta, M., (1999), “Using Activity-Based Costing and Theory of Constraints to Guide
In the following essay I will be comparing and contrasting the effectives of capital asset pricing model (CAPM), Arbitrage Pricing Theory, and the Fama-French three factor model when estimating the cost of capital and explaining performance of investment portfolios.
These costs are on account with a specific work package. Direct costs are attributed to efforts made by the project manager, project team, and folks executing the work package. These costs signify actual outflow and are compensated as the project evolves. Examples of direct costs are labor, equipment, materials, and other (Gray & Larson, 2005).
This assignment is concerned with your understanding of the key issues relative to portfolio analysis and investment. In completing this assignment you are to limit your scope to the US stock markets only. Use the Cybrary, the Internet, and course resources to write a 2-page essay which you will use with new clients of your financial planning business which addresses the following issues and/or practices:
From my perspective, the usefulness of CAPM is directed towards efficient investment decision making and strategic management. Moosa (2013) remarks CAPM to be a supportive model in ‘evaluating the performance of managed portfolios and for investment purposes’.
...nt costs are allocated using different factors. This is because to determine the magnitude and the scope of a certain cost, there must be some factors to be considered. Hence different categories of costs are treated differently and are allocated cost differently. Hence it is clear that cost allocation is a noble requirement for every project.
An explicit cost is a direct payment throughout the duration of running a business e.g. a wage, materials cost and rent. An implicit cost is where there is no actual payment as it more refers to the opportunity cost of what a firm has to give up in order to use another factor. Examples include depreciation of assets, loss of interest income on business funds, or the foregoing of a salary to add revenue to the business early on.
In the paper published by Xiong (2010), it is presented that a portfolio’s total return can be disintegrated into three components: the market return, the asset allocation policy return in excess of the market return, and the return from active portfolio management. The asset allocation policy return refers to the fixed asset allocati...
For example: with the increase of the number of products produced, the cost of operating a machine also increase. Second we have batch level costs which is associated with batches; producing a multiple units of the same product that are processed together is called a batch. The third type is product level costs which arise from any activity in order to support the production of products. The fourth and the last type is facility level costs, this costs cannot be determined with a particular unit, product or batch; this costs are fixed with respect to batches, products and number of units produced. A single measure of volume is used for allocating costs to each service or product in traditional method for example: direct material cost, machine hours, direct labor cost and direct labor hours. A cost driver is an activity that generate costs, it can be generated by two types of costs the first is a particular machine 's running costs where the costs is driven by production volume as machine hours; the second is quality inspection costs where the cost is driven by the number of times the relevant activity occurs as the number of
“Assessment is the process of identifying, gathering and interpreting information about students’ learning. The central purpose of assessment is to provide information on student achievement and progress and set the direction for ongoing teaching and learning” (NSW Department of Education and Training, 2007, p.1). I believe an assessment strategy which best encapsulates this understanding of assessment is the portfolio. Specifically, a process portfolio provides a wealth of information about a student’s progress in literacy and not only allows a teacher to assess the learning that has taken place but also helps them to identify the areas in need of improvement. Additionally, the crucial element of the student’s self-assessment and self-reflection in the process of creating the portfolio also allows both the teacher and the student to understand the progress, strengths and weaknesses of their writing.
Perhaps the most prominent form of alternative assessment in use today is the student portfolio. A portfolio can be described as a “purposeful collection of student work that exhibits the student’s efforts, progress, and achievements in one or more areas of the curriculum.” Key elements of the portfolio include evidence of students’ choosing the contents of their own portfolio, specific criteria for the selection and assessment of student work, and clear evidence that the student has reflected on his or her work (Chriest & Maher, n.d.). Portfolios have been proven an effective means of student assessment in many areas of schooling, from preschool all the way through post-graduate work. Portfolio assessment has also been rendered effective in many business settings to determine the value of an employee.
Portfolios serve the purpose of an extensive record of a student’s best work and skills. As the student progresses through life, record keeping and reflection becomes an expectation. A résumé cannot possibly describe the entire list of qualities each individual possesses. As a result, portfolios thrive in high schools and offices alike to demonstrate a person’s capabilities in the greatest detail. Any person with a future-oriented mindset should have a portfolio to create opportunities for a successful life.
This paper will define and discuss five financial theories and how they impact business decisions made by financial managers. The theories will be the Modern Portfolio Theory, Tobin Separation Theorem, Equilibrium Theory, Arbitrage Pricing Theory (APT), and the Efficient Markets Hypothesis.