ECON 132A Lecture Notes - Lecture 14: Sharpe Ratio, Cash Flow, Market Timing
31 May 2016
School
Department
Course
Professor
Document Summary
Slide 22-2: overview of what we wanted to talk about in class. Execution process: we know what our client wants so we put together a plan of asset allocations (% into stocks, bonds, commodities, international). Asset allocation decision to make is the most important decision because over 90% of a portfolio return is based on asset allocation because if you put the right amount, any stock will do well. Regardless of boom or recession, consumers need these products. Tend to do well regardless of economic cycle. Cyclical stocks: do well when economy is booming, and do bad when economy is slowing down. Sector rotation: strategy to get in and out of specific industries depending on when economy is doing well. Feedback process: how well did we do compared to other things. Primary benchmark to determine how much we made. Benchmark performance: how do you stack up against things. Passive management: diversified portfolio with no security mispricing identification.
