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Global Asset Allocation and Stock Selection Assignment #1

Global Asset Allocation and Stock Selection Assignment #1. Comparison of Investment Styles along Tactical Trading Strategies. Gold Asset Management Artima Suraphongchai Genzo Kimura Andrew (Jing) Liu Joseph Sun Stefan Prawitz. AGENDA. Methodology Overview. Forecasting Model.

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Global Asset Allocation and Stock Selection Assignment #1

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  1. Global Asset Allocation and Stock SelectionAssignment #1 Comparison of Investment Styles along Tactical Trading Strategies Gold Asset ManagementArtima SuraphongchaiGenzo KimuraAndrew (Jing) LiuJoseph SunStefan Prawitz

  2. AGENDA • Methodology Overview • Forecasting Model • Strategy Evaluation • Key Take-Aways

  3. Country-based Investing Sector-based Investing US UK JP DE Financial Health Utilities Material Mixed Investing US DE Financial Health Methodology Overview: 3 Investment Styles

  4. Each Investment Style Evaluated Across 6 Tactical Trading Strategies

  5. Country-based Forecasting Model (3) (4) (5) (2) (1) (1) (6) • Note: • P/E ratio of US equities • P/E ratio of UK equities • Change in spread of 10-year German Bunds over 10-year US Treasuries • Dividend Yield of Japanese equities • Price-Book Ratio of Japanese equities • UK term structure

  6. Sector-based Forecasting Model

  7. Historical Efficiency Frontier (Strategic View)

  8. Predicted Efficiency Frontier (Tactical View)

  9. Investment Style Comparison (Return) MSCI World Return 0.0071

  10. Investment Style Comparison (Standard Deviation) MSCI World Std Dev 0.0424

  11. Investment Style Comparison (Sharpe Ratio) MSCI World Sharpe Ratio 0.1672

  12. Standard Deviation Sharpe Ratio % of non-negative Maximum Return Minimum Return Rank of Standard Deviation Rank of Sharpe Ratio Rank of % of non-negative Rank of Maximum Return Rank of Minimum Return Two way comparison:Ranking System for Combination Evaluation (I)

  13. Two way comparison :Ranking System for Combination Evaluation (II)

  14. Key Take-Aways • Investment Style Comparison • Overall score shows Mixed Strategy is the best • Plot of efficiency frontier favors country-only strategy • Poor sector returns probably due to high inter-correlation • Tactical trading Strategy Comparison • Overall score shows 1b: Long-or-Cash (Filter Rule) is the best • Little difference between 2-Long and Long-Short trading strategies • Buy & Hold strategy has the lowest performance (But still beat MSCI World) • Best combinations is to have Combined asset classes and implement Long-Cash (with Filter) trading strategy

  15. Global Asset Allocation and Stock SelectionAssignment #1 Any Questions? Gold Asset ManagementArtima SuraphongchaiGenzo KimuraAndrew (Jing) LiuJoseph SunStefan Prawitz

  16. Regression Summary:Solid Adj-R2 and High Predicting Power

  17. GARCH model (Expected variance)

  18. Investment Style Comparison Table

  19. Strategy Comparison (Maximum Return)

  20. Strategy Comparison (Minimum Return)

  21. Global Industry Classification (GICS) • Note: • 10 Sectors (Other 6 sectors are Energy, Industrial, Consumer Staples, Consumer Discretionary, IT and Telecom) • 24 Industry Groups • 62 Industries • 132 Sub-industries Source: MSCI website

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