Justifying Active Portfolio Management

  • Two arguments can be used to justify active portfolio management for investors:
  1. Given that the mispricing of securities takes place from time to time (2007 would have been a great time to short U.S. mortgage backed securities), highly skilled active managers can exploit mispricings to generate excess returns.
  2. Even with a passive strategy, an allocation decision must be made between the risk free asset (such as government debt) and a portfolio comprised of risky assets.
  • Forecasts for risks and returns must be made in order to design the individual investor's optimal portfolio.

  • Successful limited active management can be highly beneficial for investors as periodic allocation weighting adjustments can facilitate higher returns during economic expansion and mitigate losses during economic contraction.

Membership
Learn the skills required to excel in data science and data analytics covering R, Python, machine learning, and AI.
I WANT TO JOIN
JOIN 30,000 DATA PROFESSIONALS

Free Guides - Getting Started with R and Python

Enter your name and email address below and we will email you the guides for R programming and Python.

Saylient AI Logo

Take the Next Step in Your Data Career

Join our membership for lifetime unlimited access to all our data analytics and data science learning content and resources.