FIN 010 Lecture Notes - Lecture 28: Santa Barbara City College, Gulen, Market Timing
Document Summary
Passive: optimal risky portfolio = market portfolio. Index tracking (factors that affect tracking complexity = liquidity & index additions/deletions) Passive investment (matching specified benchmark index eg. vanguard index. Aus shares fund -> s&p/asx300), buy and hold -> not much trading or capital gains thus tax efficient, match risk characteristics and minimise transaction costs/index changes) 305 v 300 holdings positioning if any changes in index, or cash at holdings (beta. = 0 ) for inflows and outflows and needed to equitize this to match beta via futures (other holding) Stock selection (identify mispriced buy undervalued, sell overvalued) Group stocks based on common characteristic (eg. ethical, tech, country, size, etc) Equity markets: styles have emerged due to market anomalies -value or size, (value vs. Managers identify generally with specific style: large growth, small value, mid cap blend etc. Changing name towards hot style" names = attract abnormal amount of fund inflow (cooper, gulen & rau, 2005)
