Embedded tax liabilities and portfolio choice

his study presents an improved method of dealing with embedded tax liabilities in portfolio choice. We argue that using a risk-free discount rate is appropriate for calculating the present value of future tax liabilities. Supportive of recent research, our results found a taxation-induced preference of holding equities over bonds, and a location preference of holding equities in the taxable account and bonds in retirement accounts. These important findings contrast with traditional investment advice which suggests a greater capacity for risk in retirement accounts.

Contributing factors to optimal project portfolio selection

A modified Delphi approach has been applied in this study to investigate best practice and to determine the factors that contribute to optimal selection of projects. There are various standards and practices that some may recognise as representing best practice in this area. Many of these have similar characteristics and this study has found no single best practice. The study identified the factors that contribute to the optimal selection of projects as: culture, process, knowledge of the business, knowledge of the work, education, experience, governance, risk awareness, selection of players, preconceptions, and time pressures. All these factors were found to be significant; to be appropriate to public sector organisations, private sector organisations and government owned corporations; and to have a strong linkage to research on strategic decision making. These factors can be consolidated into two underlying factors of organisation culture and leadership.

The Service Portfolio of a BPM Center of Excellence

A key concept for the centralized provision of Business Process Management (BPM) is the Center of Excellence (CoE). Organizations establish a CoE (aka BPM Support Office) as their BPM maturity increases in order to ensure a consistent and cost-effective way of offering BPM services. The definition of the offerings of such a center and the allocation of roles and responsibilities play an important role within BPM Governance. In order to plan the role of such a BPM CoE, this chapter proposes the productization of BPM leading to a set of fifteen distinct BPM services. A portfolio management approach is suggested to position these services. The approach allows identifying specific normative strategies for each BPM service, such as further training or BPM communication and marketing. A public sector case study provides further insights into how this approach has been used in practice. Empirical evidence from a survey with 15 organizations confirms the coverage of this set of BPM services and shows typical profiles for such BPM Centers of Excellence.

On the benefits of equicorrelation for portfolio allocation

The importance of modelling correlation has long been recognised in the field of portfolio management, with largedimensional multivariate problems increasingly becoming the focus of research. This paper provides a straightforward and commonsense approach toward investigating a number of models used to generate forecasts of the correlation matrix for large-dimensional problems.We find evidence in favour of assuming equicorrelation across various portfolio sizes, particularly during times of crisis. During periods of market calm, however, the suitability of the constant conditional correlation model cannot be discounted, especially for large portfolios. A portfolio allocation problem is used to compare forecasting methods. The global minimum variance portfolio and Model Confidence Set are used to compare methods, while portfolio weight stability and relative economic value are also considered.

Covariance Averaging for Improved Estimation and Portfolio Allocation

We propose a new method for estimating the covariance matrix of a multivariate time series of nancial returns. The method is based on estimating sample covariances from overlapping windows of observations which are then appropriately weighted to obtain the nal covariance estimate. We extend the idea of (model) covariance averaging o ered in the covariance shrinkage approach by means of greater ease of use, exibility and robustness in averaging information over different data segments. The suggested approach does not su er from the curse of dimensionality and can be used without problems of either approximation or any demand for numerical optimization.

Essays on robust portfolio selection and pension finance

This thesis examines three different, but related problems in the broad area of portfolio management for long-term institutional investors, and focuses mainly on the case of pension funds. The first idea (Chapter 3) is the application of a novel numerical technique – robust optimization – to a real-world pension scheme (the Universities Superannuation Scheme, USS) for first time. The corresponding empirical results are supported by many robustness checks and several benchmarks such as the Bayes-Stein and Black-Litterman models that are also applied for first time in a pension ALM framework, the Sharpe and Tint model and the actual USS asset allocations. The second idea presented in Chapter 4 is the investigation of whether the selection of the portfolio construction strategy matters in the SRI industry, an issue of great importance for long term investors. This study applies a variety of optimal and naïve portfolio diversification techniques to the same SRI-screened universe, and gives some answers to the question of which portfolio strategies tend to create superior SRI portfolios. Finally, the third idea (Chapter 5) compares the performance of a real-world pension scheme (USS) before and after the recent major changes in the pension rules under different dynamic asset allocation strategies and the fixed-mix portfolio approach and quantifies the redistributive effects between various stakeholders. Although this study deals with a specific pension scheme, the methodology can be applied by other major pension schemes in countries such as the UK and USA that have changed their rules.

Decision making in the product portfolio: methods adopted by Brazil?s innovative companies

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Active versus passive management : the case of BOVESPA

Mestrado em Finanças

Service aggregators in business networks

This position paper examines the development of a dedicated service aggregator role in business networks. We predict that these intermediaries will soon emerge in service ecosystems and add value through the application of dedicated domain knowledge in the process of creating new, innovative services or service bundles based on the aggregation, composition, integration or orchestration of existing services procured from different service providers in the service ecosystem. We discuss general foundations of service aggregators and present Fourth-Party Logistics Providers as a real-world example of emerging business service aggregators. We also point out a demand for future research, e.g. into governance models, risk management tools, service portfolio management approaches and service bundling techniques, to be able to better understand core determinants of competitiveness and success of service aggregators.

Incentives to underprice

an initial public offering, the choices made by issuers, such as the offer price, might not appear to be wealth maximizing. In this article, we argue that the choices are strategic. Based on the model developed by Barry (1989), we show that the average change in the issuer's wealth (4.52 per cent) is lower than the average loss implied by underpricing (12.09 per cent). Our results support the notion that the choices issuers make at the offering generate a compensatory benefit in the aftermarket. That the issuer may well not suffer a net wealth loss from the offering is in accordance with continued initial public offering activity.

The role of U.S. timberland in real estate portfolios

Timberland is seen as a long-term investment which has recently received increased institutional investor attention in many countries and potentially provides added value in a mixed-asset portfolio. Using the National Council of Real Estate Investment Fiduciaries (NCREIF) timberland series, this paper analyses the risk-adjusted performance and portfolio diversification benefits of timberland in the United States over the period of 1987-2007. U.S. timberland is seen to have been a strongly performed asset class with significant portfolio diversification benefits over this period; with a significant portfolio role separate to that of real estate. However, recent years have seen reduced risk-adjusted returns, with some loss of portfolio diversification benefits of timberland with stocks and real estate. Global drivers are likely to see increased future demand for timberland investment.

Design of a model-generated repository as a service for USDL

SAP and its research partners have been developing a lan- guage for describing details of Services from various view- points called the Unified Service Description Language (USDL). At the time of writing, version 3.0 describes technical implementation aspects of services, as well as stakeholders, pricing, lifecycle, and availability. Work is also underway to address other business and legal aspects of services. This language is designed to be used in service portfolio management, with a repository of service descriptions being available to various stakeholders in an organisation to allow for service prioritisation, development, deployment and lifecycle management. The structure of the USDL metadata is specified using an object-oriented metamodel that conforms to UML, MOF and EMF Ecore. As such it is amenable to code gener-ation for implementations of repositories that store service description instances. Although Web services toolkits can be used to make these programming language objects available as a set of Web services, the practicalities of writing dis- tributed clients against over one hundred class definitions, containing several hundred attributes, will make for very large WSDL interfaces and highly inefficient “chatty” implementations. This paper gives the high-level design for a completely model-generated repository for any version of USDL (or any other data-only metamodel), which uses the Eclipse Modelling Framework’s Java code generation, along with several open source plugins to create a robust, transactional repository running in a Java application with a relational datastore. However, the repository exposes a generated WSDL interface at a coarse granularity, suitable for distributed client code and user-interface creation. It uses heuristics to drive code generation to bridge between the Web service and EMF granularities.