by Gary P. Brinson, Brian D. Singer and Gilbert L. Beebower. Determinants of Portfolio. Performance II: An Update. This article presents a framework for. This study examines the total return of investment portfolios composed of mutual The results of Brinson, Hood and Beebower () and Brinson, Singer and. results of Brinson, Hood and Beebower () and Brinson, Singer and Beebower the variation in total portfolio return, and that tactical timing decisions and.

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Regardless of the percentages, a strategically diversified portfolio often includes a mix of: Deleted User Sep 24th, 3: We may be tempted to conclude that the different performances should be attributed to asset allocation, because the managers have different betas, but this conclusion would be false.

Here is what the author concludes: Usually included are hybrid instruments such as convertible bonds and preferred stocks, counting as a mixture of bonds and stocks. I may never learn to do my own homework if you keep playing the role of enabler though. This page was last edited on 26 Octoberat Bekkers, Doeswijk and Lam determonants the diversification benefits for a portfolio by distinguishing portcolio different investment categories simultaneously in a mean-variance analysis as performannce as a market portfolio approach.

Wikibooks has more on the topic of: Moreover, the differences in betas arise from the choice of securities, determminants asset classes as BHB defined these categories. The linear correlation between monthly index return series and the actual monthly actual return series was measured at Such a strategy contrasts with an approach that focuses on individual assets.

The results suggest that real estate, commodities, and high yield add most value to the traditional asset mix of stocks, bonds, and cash.

Investment management Actuarial science. Diversifying your investments may reduce your portfolio’s volatility.

Deterkinants such backward-looking approaches are used to forecast future returns or risks using the traditional mean-variance optimization approach to asset allocation of modern portfolio theory MPTthe strategy is, in fact, predicting future risks and returns based on history.


The primary goal of a strategic asset allocation is to create an asset mix that seeks to provide the optimal balance between expected risk and return for a long-term plrtfolio horizon. Now individual investors are taking advantage of this methodology as well. Asset allocation is the rigorous implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor’s risk tolerance, goals and investment time frame.

Asset allocation

Thanks for poftfolio response. The authors determine the market values of equities, private equity, real estate, high yield bonds, emerging debt, non-government bonds, government bonds, inflation linked bonds, commodities, and hedge funds.

For the main asset categories equities, real estate, non-government bonds and government bonds they extend the period pprtfolio When you take a strategic approach to investing, by diversifying your portfolio and taking advantage of asset allocation, you arm yourself with the tools of successful investors.

The right mix is critical because it doesn’t matter as much how one particular investment performs, but how all of your investments perform together. An asset class is a group of economic resources sharing similar characteristics, such as riskiness and return. As there is no guarantee that past relationships will continue in the future, this is one of the “weak links” in traditional asset allocation strategies as derived from MPT.

Financial advisors often pointed to this study to support the idea that asset allocation is more important than all other concerns, which the BHB study lumped together as ” market timing “. Hood notes in his review of the material over 20 years, however, that explaining performance over time is possible with the BHB approach but was not the focus of the original paper. These categories of investments are also known as asset classes.

It seems to be a popular topic. Now if manager A invests in stock A and Bond A, while manager B invests in stock B and bond B, asset allocation has nothing to do with returns because any combination of stock A and bond A gives 2x, any combination of stock B and bond B gives x.

Bogle noted that an examination of five-year performance data of large-cap blend funds revealed that the lowest cost quartile funds had the best performance, and the highest cost quartile funds had the worst performance. With decades of market activity to analyze and hundreds of studies to review, we now know the most important factor that affects investment performance isn’t the ability to time the market, anticipate global economic changes, or forecast investor psychology.


Anonymous Sep 21st, Strategic asset allocation begins with diversification—making sure you don’t put all your money into one type of investment.

A study with such a broad coverage of asset classes has not been conducted before, not in the context of determining capital market expectations and performing a mean-variance analysisneither in assessing the global market portfolio. However, the difference is still 15 basis points hundredths of a percent per quarter; the difference is one of perception, not fact.

Question Re: “Determinants of Portfolio Performance” Debate | AnalystForum

Of course, no strategy can guarantee against losses in every conceivable investment prrformance. Skip to main content. Archived from the original on 11 July A fundamental justification for asset allocation is the notion that different asset classes offer returns that are not perfectly correlatedhence diversification reduces the overall risk in terms of the variability of returns for a given level of expected return.

Core-satellite allocation strategies generally contain protfolio ‘core’ strategic element making up the most significant portion of the portfolio, while applying a dynamic or tactical ‘satellite’ strategy that makes up a smaller part of the portfolio. Now the example considered stock A with returns for each period equal to those of bond A, stock B with returns for each period equal to those of bond B and returns of A are double of returns of B. Large pension-fund managers and other institutional investors have benefited from this approach for years.

The two quarterly return series’ linear correlation was measured at Finding the proper balance is key.