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    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I need to learn how to do the following
    Review two articles (similar to the ones enclosed) and prepare the following:

    Brief summary (including the big ideas or major points of the article) along with some synthesis of the ideas and some personal thoughts.
    Also I need to draw parallels with current events.

    What i need is these to articles reviews (separate) so i can used them as guide to prepare my owns.

    © BrainMass Inc. brainmass.com September 27, 2022, 11:24 am ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/economic-growth-portfolio-analysis-443898

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    SOLUTION This solution is FREE courtesy of BrainMass!

    Hello there, I have written reviews of each of these two articles for you. They are attached as separate documents. Each review included four sections: Major Points, Synthesis of Ideas, Application to Current Events, and Personal Thoughts.

    Best of luck!

    Article Title: Global Portfolio Optimization

    Major Points

    The asset allocation of a global portfolio is the most significant factor in its composition and optimization. Computer models seem like a great way to enhance optimization by correlating risk, composition, and asset classes. However, the results most investors have gotten when they use these models are not always good for overall optimization: no constraints on the model yield large, short positions; constraints on the model rule out short positions but emphasize large weights on small market capitalizations.

    There are two reasons for the model's failures: (1) expected returns are difficult to estimate, (2) the optimal portfolio assets weights and currency positions are too sensitive to the assumptions the model uses to calculate composition.

    The authors propose a solution to the issues encountered with using the model. The idea is to use the investor's own views on global equities, bonds, and currencies and supplement this with information on risk premiums from a CAMP equilibrium model.
    The proposal here involves deciding on adequate benchmarks from which to measure risk. The objective should be to maximize return per unit of portfolio risk. The benchmark defines the point at which risk is measured and represents the optimal amount of risk a portfolio should include.
    Overall, the use of the CAPM equilibrium formula to supplement the use of the quantitative asset allocation models can significantly improve the behavior of the model's outputs. The author's intended solution allows the investor to distinguish between his own views and his expected rate of return to generate an optimal portfolio.

    Synthesis of the Ideas
    Quantitative asset allocation models are important tools in assessing a portfolio. Unfortunately, they haven't been used to a large degree. The authors contend that this is because such models are difficult to use and hard to manage. By using a CAPM equilibrium formula, the authors suggest that the usefulness of quantitative asset allocation models will be improved. The CAPM formula provides a neutral starting point for equities, bonds, and currencies and can drive the optimization of a portfolio.

    Application to Current Events
    This article and the author's suggestion for incorporating the CAPM equilibrium model into quantitative asset management are very timely. The issue of tempering tactical asset allocation with a quantitative approach is an area of high traffic research. Those working in the field have suggested that interest rate models, asset allocation models, and quantitative techniques can all help an investor optimize his portfolio. In today's global economic market, this is all the more important. Investors have to figure out how to avoid economic pitfalls while maintaining diversified portfolios.

    Personal Thoughts
    I enjoyed reading this article. While the math behind the incorporation of the CAPM equilibrium formula into the quantitative asset allocation model can be a bit confusing, I do understand the authors' point on incorporating the investor's own experience and an outside benchmark into the portfolio optimization process. Given the current economic climate in the United States and the looming debt crisis in Europe, I can see how having a solid plan to approach portfolio optimization is important.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com September 27, 2022, 11:24 am ad1c9bdddf>
    https://brainmass.com/business/capital-asset-pricing-model/economic-growth-portfolio-analysis-443898

    Attachments

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