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Portfolio Design - Coggle Diagram
Portfolio Design
Principles
Systematic and Repeatable
Risk-controlled: focusing on low TE and high IR
Strong economics and emprical foundation
Sources of returns
Valuation
Cash-flow based: helps in difficult time
Book-value: helps in good time
Quality
Less prone to accounting risk
Well managed (shareholder-focused)
Consistently Profitable
Recognized by markets
Risk controlled
Identify/Manage unwanted risk
Sector-neutral to avoid cylical risk
Country risk to avoid macro/political risk
Diversified to avoid concentration
Why: IR focused,
Portfolio construction:
Alignment of all pieces: risk/return/constraints
Key areas of concerns
Past-fitting (data mining)
Only focus on proven academic ideas
Devise different ways of evaluating
Methodologies
Time and space
Team approach with constructive debates
Goals: Consistent long run excess return