25 years: Investment management
In this video, Ali explains more closely one of the behavioural analytical approaches, what can we learn from historical transactions, as a basis for assessing how to improve investment decision making in the future. He will focus on a simple equity portfolio and some basic decisions to illustrate this.
In this video, Ali explains more closely one of the behavioural analytical approaches, what can we learn from historical transactions, as a basis for assessing how to improve investment decision making in the future. He will focus on a simple equity portfolio and some basic decisions to illustrate this.
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9 mins 48 secs
In inferring investment decisions from past transactions, one must use all the information available in order to make informed assumptions about the most likely nature of a portfolio manager’s past choices.
Key learning objectives:
How can we infer investment decisions from historical transactions?
What are some important considerations when assessing decisions?
What are Equity, Fixed Income & Multi Asset portfolio strategies?
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Let's take a simple equity portfolio as an example. A portfolio manager has the objective of outperforming a defined market index and they are holding 50 stocks.
We will need to start by having an extract of past transactions or holdings. From this, we should be able to start inferring simple decisions.
For Equity Portfolios, these strategies can include: Selecting a stock, Overweighting a segment (a sector or a country), going Long on a stock and short on another or Timing a Market exposure.
For Fixed income Portfolios, Strategies are linked to interest rates, Credit or bond selection on Investment grade or High yield bonds, Currency exposure or Relative exposure of one curve versus another.
For Multi Asset portfolios, we can look at Asset allocation across asset classes, regions or factors, Manager or fund selection or Overly strategies.
As long as we can articulate the portfolio into strategies reflecting investment decisions, it becomes possible to explore the behaviours of the portfolio managers and to assess if the decision-making process is delivering the desired performance outcome.
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