This class exists in these courses :
• IÉSEG > IESEG Degree - Programme Grande École > Semester 2 > 2,00 ECTS

Prerequisites

PORTFOLIO MANAGEMENT AND ANALYSIS (strict)
ACTIVE PORTFOLIO MANAGEMENT: INVESTMENT SIMULATION (strict)

Learning outcomes

- Explain the central role of the asset allocation within the investment process
- Design a consistent and client-specific strategic asset allocation for the long-run using the Mean-variance Analysis framework. See limitations of the approach and avoid frequent pitfalls when collecting and manipulating historical data
- Formulate long-term expectations about returns for major asset classes, relating asset pricing models to macroeconomic factors
- Identify phases of the business cycle which are commonly supportive to each asset classes
- Exploit the benefit of a geographical, sector or style segmentation, especially when managing a global and diversified portfolio

Course description

Empirical surveys periodically highlight the dominance of the asset class allocation as a contributor of performance over the long-run, far ahead of other investment skills such as stock picking or market timing. The course will explore how to develop a robust asset allocation, formulating and justifying recommendations to comply with the client requirement and practise in manipulating data (market prices & macroeconomic data), using application tools (optimizers, multilinear regression models):
Part 1 - Mean-Variance framework & Historical Returns approach : Recall & application through a practical case study.
Part 2 - Conditional Returns approach : modelling long-term expected returns and risk premiums using macroeconomic factors
Part 3 - Short-term Adjustment of the asset allocation to grab the positive influences of business cycles on each specific asset class
Part 4 - Extension to a global investment portfolio

Class type

Class structure

Teaching methods

• Case study
• Interactive class
• Project work
• Tutorial

Assessment

The students will be assessed on participation (analysis skill, reuse of knowledges, a project work involving the entire examination of a client situation, and the developing of an appropriate strategy for the long-run applying methodology and collecting information to properly convince the client.

Recommended reading

• Global Asset Allocation - New Methods and Applications- Zimmerman/Drobetz/Oertmann -

• Global Asset Allocation - A survey of the world's top investment strategies - Farber -

• Strategic Asset Allocation - White Paper - Lyxor - Roncali -