Finding the best portfolio for the long term investor
Master thesis
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http://hdl.handle.net/11250/135534Utgivelsesdato
2010Metadata
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Sammendrag
This paper examines different portfolios of U.S financial assets, trying to find the best
portfolio for the long-term investor. I compare bond portfolios with stock portfolios based on
statistics as book-to-market ratio, market capitalization, earnings yield, dividend yield and
cash flow yield, stock portfolios based on industry and the market portfolio. The ranking
devices I am using are Sharpe ratio and Sortino ratio. Dependent on the assumption on
whether the returns are independent and identically distributed or not, the probability
distribution of the return are simulated by using two different methods, the standard bootstrap
method and the block-bootstrap method. Since I am calculating both the Sharpe ratio and the
Sortino ratio with both methods, I have four different outcomes of my analysis.
The results depend on my assumptions, when I calculate Sharpe ratios by using the bootstrap
method, bonds tend to outperform stocks. In the three other scenarios however, my analysis
shows that stocks tend to outperform bonds, and stock portfolios with high book-to-market
ratios, high dividend yields, high earnings yield or high cash flow yield tend to perform better
than other portfolios.
Beskrivelse
Masteroppgave i økonomi og administrasjon - Universitetet i Agder 2010