The
Impact Of Asset Allocation Between Stocks And Bonds On The Portfolio
Performance (2008)
This
dissertation will demonstrate the effects of introducing bonds into the
stock portfolio. The two portfolios are constructed in order to compare
their performances to show whether the asset allocation between stocks
and bonds produces positive or negative effect. The results are twofold
and unexpected. I have shown that the portfolio, which includes stocks
and bonds, has a lower beta and a lower standard deviation of returns
than the portfolio, which includes only stocks. Therefore the market
risk and total portfolio risk of the first portfolio are appreciably
reduced. However the return on this portfolio is also reduced. And it
is reduced so sharply, that the portfolio that consisted only of stocks
has a superior performance in terms of risk-adjusted return than the
portfolio consisted of stocks and bonds. Calculated values of Sharpe
ratio, Treynor’s measure and Jensen’s measure
attest to
such a non-presumable result.
- 11,000 words –
105 pages in length
- Excellent use of
literature
- Good in depth analysis
- Well written throughout
- Ideal
for finance and accounting students
CHAPTER
1 – Introduction
Hypothesis
Chapter Outline
CHAPTER
2 –
Methodology
What is Research?
Research. Definitions
Features of Student Research
Stages of Research
Types of Research
Deductive and Inductive Approaches
Primary and Secondary Research
CHAPTER
3 –
Literature Review
Asset Allocation Process
Importance of Asset Allocation Decision
Types of Asset Allocation
Risk Preferences of Individual Investors
Why Should I Invest in Bonds?
Bond Risks
Stocks versus Bonds
Portfolio Performance Measures
Correlation between Stocks and Bonds
Portfolio Beta as a Risk Measure
Standard Deviation
Sharpe Ratio
Treynor’s Measure
Jensen’s Measure
CHAPTER
4 – Research
and Analysis
Research Limitations and Assumptions
Obtaining Data
Correlation between Bonds and Stocks Returns
Portfolio Beta
Return and Standard Deviation
Sharpe Ratio
Treynor’s Measure
Jensen’s Measure
Summary
CHAPTER
5 –
Conclusions
Challenges for Future Research
Reference
List
Appendixes
Reflective Statement
Asset Allocation Recommended by Various Financial Advisors
Different Asset Allocation Models. Years to Retirement or until Money
is Needed
Stock Portfolio
Stock-Bond Portfolio: Stocks
Correlation between Stocks and Bonds
5 Year Correlation between Stocks and Bonds
Portfolio Beta
Portfolio Beta (continued)
Return and Standard Deviation of Stock Portfolio
Return and St. Dev. of Stock-Bond Portfolio
Risk and Return
Stocks and Bonds Monthly Standard Deviations
Calculating 3 Month Return and St. Dev. for Stock Portfolio (part 1)
Calculating 3 Month Returns and St. Dev. for Stock-Bond Portfolio (part
1)
Return Distribution
Standard Deviation
Portfolio Performance Evaluation
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