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Aspects of capital allocation

  • Authors: Sonnekus, Hélène
  • Date: 2013-07-29
  • Subjects: Financial risk management , Asset allocation , Risk - Measurement , Portfolio management
  • Type: Thesis
  • Identifier: uj:7703 , http://hdl.handle.net/10210/8569
  • Description: M.Sc. (Statistics) , Most people in the world rely on a well-functioning and stable financial system. Problems experienced by financial institutions, such as too little liquidity or large amounts of bad debt, can easily influence companies and individuals, creating a chain reaction comparable to an avalanche. Financial institutions are faced with a very difficult constrained optimization problem - generating as much profit as possible while staying in business by limiting the amount of risk taken.
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Dynamic portfolio insurance and tactical asset allocation on the JSE

  • Authors: Mngomezulu, Zwelakhe Sizwe
  • Date: 2016
  • Subjects: Portfolio management , Asset allocation , Financial risk management , Options (Finance) - Prices - Mathematical models
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/245956 , uj:25487
  • Description: M.Com. (Financial Economics) , Abstract: The pressing question on the minds of academics and investment professionals is whether portfolio managers can evidently protect investors’ capital during a period of economic downturn and provide superior returns with a minimum level of risk. This study attempts to answer this question by evaluating the performance of portfolio insurance methods using different asset classes traded on the local Johannesburg Stock Exchange and other global markets. The chosen data period for evaluation starts from 02 June 2004 to 31 December 2013. The study compares insured portfolios (made up of two methods: the Option-Based Portfolio Insurance and the Constant Proportion Portfolio Insurance) with uninsured portfolios made of these asset classes in order to demonstrate the benefit of portfolio insurance in protecting investors’ capital during both bull and bear markets. The study makes use of different asset allocation approaches including buy and hold, risk parity, minimum variance, and momentum in order to build an optimal uninsured portfolio. The results of the study show that the minimum variance approach of the Constant Proportion Portfolio Insurance strategy with a static multiplier of m=2 consistently outperforms uninsured and the Option-Based Portfolio Insurance portfolios. It is argued that this outperformance might be due to holding risky assets with lower volatility. Furthermore, when a dynamic multiplier is used, it was found that the risk parity approach for the Constant Proportion Portfolio Insurance results in the best-performing asset allocation method due to its lower downside deviation, higher Calmar ratio and fewer months to recover from a maximum drawdown. Both the static and dynamic Constant Proportion Portfolio Insurance strategy methods provided 100% protection of investors’ capital even during the 2008-2009 Global Financial Crisis. In contrast with the Constant Proportion Portfolio Insurance strategy, it was found that an Option-Based Portfolio Insurance strategy with the buy and hold asset allocation approach fails to provide maximum protection for investors’ capital during periods of financial crises, since it lost 9, 45% in 2008. Hence, the Option-Based Portfolio Insurance portfolios (insured) with a buy and hold approach underperform uninsured portfolios.
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Financialisation of professional athletes as an alternative investment asset class

  • Authors: Oberholzer, David Johannes
  • Date: 2016
  • Subjects: Investments , Portfolio management , Asset allocation
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/237215 , uj:24302
  • Description: M.Com. (Investment Management) , Abstract: This study explores the possibility of the financialisation of professional athletes as a viable investment vehicle. The study commences with an in-depth literature review. The literature review is conducted with two separate objectives that are to be met. The first objective, in Chapter two, investigates the relevant literature surrounding alternative asset classes. The second objective, in Chapter three, investigates whether any existing valuation models exist for professional athletes. The exploration of the first objective attempted to establish the feasibility of including the newly conceptualised asset class within the realm of alternative assets. The investigation found that no limitations exist to the inclusion of new asset classes to the field of alternative assets. The second literature exploration was aimed at establishing, whether or not, existing literature can provide guidance to establish a valuation model. The literature was found to be very limited and allowed for researcher discretion in the Conceptualised Index Model. The Conceptualised Index Model attempted to value professional cricket players that participated in the 2015 Indian Premier League tournament. The study utilised an index model due to the advantages described by Tang and Xiong (2012). The advantages include the ability to compare different variables with each other. The use of an index model is further beneficial as Gomez and Korine (2008) states that indices ease the process of financialisation and liquidity. The study found that it is possible to value the chosen professional athletes relative to each other through the use of the Conceptualised Index Model.
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Multivariate copulas in financial market risk with particular focus on trading strategies and asset allocation

  • Authors: Stander, Yolanda Sophia
  • Date: 2012-11-05
  • Subjects: Copulas (Mathematical statistics) , Variables (Mathematics) , Asset allocation , Financial risk
  • Type: Thesis
  • Identifier: uj:7351 , http://hdl.handle.net/10210/8099
  • Description: D.Comm. , Copulas provide a useful way to model different types of dependence structures explicitly. Instead of having one correlation number that encapsulates everything known about the dependence between two variables, copulas capture information on the level of dependence as well as whether the two variables exhibit other types of dependence, for example tail dependence. Tail dependence refers to the instance where the variables show higher dependence between their extreme values. A copula is defined as a multivariate distribution function with uniform marginals. A useful class of copulas is known as Archimedean copulas that are constructed from generator functions with very specific properties. The main aim of this thesis is to construct multivariate Archimedean copulas by nesting different bivariate Archimedean copulas using the vine construction approach. A characteristic of the vine construction is that not all combinations of generator functions lead to valid multivariate copulas. Established research is limited in that it presents constraints that lead to valid multivariate copulas that can be used to model positive dependence only. The research in this thesis extends the theory by deriving the necessary constraints to model negative dependence as well. Specifically, it ensures that the multivariate copulas that are constructed from bivariate copulas that capture negative dependence, will be able to capture negative dependence as well. Constraints are successfully derived for trivariate copulas. It is, however, shown that the constraints cannot easily be extended to higher-order copulas. The rules on the types of dependence structures that can be nested are also established. A number of practical applications in the financial markets where copula theory can be utilized to enhance the more established methodologies, are considered. The first application considers trading strategies based on statistical arbitrage where the information in the bivariate copula structure is utilised to identify trading opportunities in the equity market. It is shown that trading costs adversely affect the profits generated. The second application considers the impact of wrong-way risk on counterparty credit exposure. A trivariate copula is used to model the wrong-way risk. The aim of the analysis is to show how the theory developed in this thesis should be applied where negative correlation is present in a trivariate copula structure. Approaches are considered where conditional and unconditional risk driver scenarios are derived by means of the trivariate copula structure. It is argued that by not allowing for wrong-way risk, a financial institution’s credit pricing and regulatory capital calculations may be adversely affected. The final application compares the philosophy behind cointegration and copula asset allocation techniques to test which approach produces the most profitable index-tracking portfolios over time. The copula asset allocation approach performs well over time; however, it is very computationally intensive.
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Risk-based asset allocation : a forward looking approach

  • Authors: Mantshimuli, Lamukanyani Alson
  • Date: 2016
  • Subjects: Asset allocation , Financial crises , Portfolio management , Financial risk
  • Language: English
  • Type: Masters (Thesis)
  • Identifier: http://hdl.handle.net/10210/237248 , uj:24306
  • Description: M.Com. (Financial Economics) , Abstract: The portfolio allocation problem is characterised by two factors; risk and expected return. This is mainly explained by the Markowitz (1952) mean-variance framework. The frequency and severity of recent financial crises has led to an increase in calls for improved asset allocation methods in the asset management industry. Asset allocation strategies should protect investor capital and result in higher relative returns in turbulent times. Modern portfolio theory has been heavily criticised (Lee, 2011; Roncalli, 2013) for failure to provide adequate diversification to protect fund managers during crises, hence the emergence of risk-based asset allocation methods that focus on portfolio construction based on risk and diversification. The crises led to poor performance of different portfolios and funds, especially those with high exposure to equities. Risk-based allocation methods try to achieve investors’ goals of safety and higher returns, irrespective of future market behaviour. Six risk-based asset allocation strategies were explored and contrasted; Equally weighted, Risk parity, Most Diversified, Minimum Correlation, Minimum variance and the Minimum CVaR portfolio. This was done in an effort to find the method which performs better when investors have different investment goals. Predicted risk measures were applied as inputs in these risk-based asset allocation methods (i.e. a forward looking approach was taken). The study focused on comparisons of the risk-based asset allocation methods using forwardlooking risk measures in the South African market. The main results of the study include the finding that risk-based asset allocation methods are effective in protecting investors’ capital and achieve higher returns than the market portfolio during crisis periods compared to other periods as expected. It was also found that the Minimum Correlation Portfolio performed better than all other risk-based asset allocation during the crisis period, which means it is the best risk-based asset allocation method to use during crisis periods in the South African market . There has not been a lot of studies on the perfomance of the Minimum Correlation Portfolio, and this result shows the need for a comprehensive study on all risk-based asset allocation methods in different countries/regions to determine which risk-based asset allocation technique is best for different regions.
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The asset allocation decision in managing the portfolios of small individual investors

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