Portfolio Management Vs Passive Management In The Business Cycle - 12375 Words

Portfolio Management Vs Passive Management In The Business Cycle? (Dissertation Sample) Content: IS ACTIVE PORTFOLIO MANAGEMENT OUTPERFORMING PASSIVE MANAGEMENT IN THE BUSINESS CYCLE?Management summary The researcher has taken the opportunity for analysis of active portfolio in management outperformance and passive management in the business cycle. For this analysis, the dissertation has been divided into three chapters In the first chapter, a Literature review of Active Portfolio Management, Passive portfolio Management, Common practices of US fund and the Business cycle has been discussed. The impact of mutual funds in the market and financial sector and history of fund market has been described. In the chapter, the management of the portfolio in the context of active and passive way has been described. In chapter two, the research methodology used for the research has been discussed. In this research two methodologies have been used that is Desk research and Empirical research. Desk research methodology has been used as the data is collected from the existing resource which helped to reduce the time and cost of the research, it is performed at the starting phase of the market research. Empirical research has been used which is based on observation and phenomenon which are measures and derivation of knowledge from experience. In chapter three, the research design, research philosophy, research approach and data collection and analysis method which is used has been described. In this research descriptive design, deductive approach and secondary research philosophy have been used. In the research secondary data collection method and qualitative data collection method has been used. This research includes the active and passive portfolio analysis along with performance analysis. Acknowledgment It has provided me with great satisfaction to make the final submission of research which focuses on "Is active portfolio management outperforming passive management in the business cycle?†. I am grateful to the fellow members who helped me in the successful completion of the project. I would like to express thanks to people who guided me in preparation of this research. I would like to thanks my higher authority, who guided me in this research. I would like to appreciate the respondents of the survey and interview and cooperated in the collection of data efficiently and effectively. Thank You, List of Figures TOC \h \z \t "Heading 2" \c Figure 2: Efficient market theory PAGEREF _Toc517969938 \h 20 Figure 2.1: Business Cycle PAGEREF _Toc517969939 \h 28 Figure 2.2: Phases of business cycle PAGEREF _Toc517969940 \h 29 Figure 3.1: Meta analysis of empirical research PAGEREF _Toc517969941 \h 37 Figure 3.2 Research design PAGEREF _Toc517969942 \h 38 Figure 3.3 Philosophy of the research PAGEREF _Toc517969943 \h 39 Figure 3.4 Approach of research PAGEREF _Toc517969944 \h 41 Figure 3.5: Data collection methods PAGEREF _Toc517969945 \h 41 Figure 4.1: Rate of Average annual returns of VDIGX PAGEREF _Toc517969946 \h 43 Figure 4.2: Increase in dividend growth fund of VDIGX PAGEREF _Toc517969947 \h 44 Figure 4.3: the Stock style of VDIGX PAGEREF _Toc517969948 \h 45 Figure 4.4 Stock style of VPMAX PAGEREF _Toc517969949 \h 46 Figure 4.5 Stock style of AIVSX PAGEREF _Toc517969950 \h 48 Figure 4.6: Fund flows in the US in 2017 PAGEREF _Toc517969951 \h 50 Figure 4.7: Annual flows to US mutual funds and ETFs PAGEREF _Toc517969952 \h 51 Figure 4.8: Increase in the stock market after a global financial crisis PAGEREF _Toc517969953 \h 53 Figure 4.9: Volatility in the US market from 2008-2018 PAGEREF _Toc517969954 \h 54 Figure 4.10: Standard Deviation of Return PAGEREF _Toc517969955 \h 55 Figure: 4.11 Price Chart of Vanguard Dividend Growth PAGEREF _Toc517969956 \h 56 Figure 4.12 Average Annual Returns of Vanguard Dividend Growth Fund PAGEREF _Toc517969957 \h 56 Figure 4.13 Tax Returns of Vanguard Dividend Growth Fund PAGEREF _Toc517969958 \h 57 Figure 4.14 Performance Overview of Vanguard PRIMECAP PAGEREF _Toc517969959 \h 58 Figure 4.15 Growth of Vanguard PRIMECAP PAGEREF _Toc517969960 \h 59 Figure 4.16 Risk and Volatility of Vanguard PRIMECAP PAGEREF _Toc517969961 \h 60 Figure 4.17 Average Annual Returns of Nicholas or NICSX PAGEREF _Toc517969962 \h 61 Figure 4.18 Growth of Nicholas or NICSX PAGEREF _Toc517969963 \h 61 List of Tables TOC \h \z \t "Heading 3" \c Table 4.1: Comparison of Equity characteristics between VDIGX and SPDR SP 500 ETF (SPY) PAGEREF _Toc517969639 \h 45 Table 4.2: Comparison of VPMAX and SPDR SP 500 ETF (SPY) PAGEREF _Toc517969640 \h 46 Table 4.3: Comparison of NICSX and SPY PAGEREF _Toc517969641 \h 47 List of Abbreviations VDIGX: Vanguard Dividend Growth Fund SPY: SPDR SP 500 ETF VPMAX: Vanguard PRIMECAP Adm NICSX: Nicholas Fund, Inc AIVSX: Investment Company of America Table of Contents TOC \h \z \t "Heading 1" \c 1. Introduction PAGEREF _Toc517970814 \h 10 Introduction: PAGEREF _Toc517970815 \h 10 Project Scope and Limitations PAGEREF _Toc517970816 \h 11 Limitations PAGEREF _Toc517970817 \h 12 Project Objectives PAGEREF _Toc517970818 \h 12 Definition of terms PAGEREF _Toc517970819 \h 13 2. Literature Review PAGEREF _Toc517970820 \h 14 Management of an active portfolio PAGEREF _Toc517970821 \h 14 Management of a passive portfolio PAGEREF _Toc517970822 \h 17 Efficient Market Theory PAGEREF _Toc517970823 \h 20 Common Practices related to US funds PAGEREF _Toc517970824 \h 22 Background of the investment institution PAGEREF _Toc517970825 \h 23 Data overview PAGEREF _Toc517970826 \h 24 Compensation structure PAGEREF _Toc517970827 \h 24 Portfolio pumping PAGEREF _Toc517970828 \h 25 Business cycles PAGEREF _Toc517970829 \h 27 Business cycle PAGEREF _Toc517970830 \h 27 Technology Bubble PAGEREF _Toc517970831 \h 30 Financial crisis PAGEREF _Toc517970832 \h 32 Types of financial crisis PAGEREF _Toc517970833 \h 33 3. Research Methodology PAGEREF _Toc517970834 \h 36 Desk Research PAGEREF _Toc517970835 \h 36 Meta-analysis for empirical research PAGEREF _Toc517970836 \h 37 Research design PAGEREF _Toc517970837 \h 38 Research philosophy PAGEREF _Toc517970838 \h 39 Research approach PAGEREF _Toc517970839 \h 41 Collection of data and methods of analysis PAGEREF _Toc517970840 \h 42 4. Results (Analysis) PAGEREF _Toc517970841 \h 43 Introduction PAGEREF _Toc517970842 \h 43 Active Portfolio Analysis PAGEREF _Toc517970843 \h 43 Passive Portfolio Analyses PAGEREF _Toc517970844 \h 50 Empirical Research Analyses PAGEREF _Toc517970845 \h 52 Performance Analysis PAGEREF _Toc517970846 \h 55 5. Discussion PAGEREF _Toc517970847 \h 63 Conclusion PAGEREF _Toc517970848 \h 66 Limitations PAGEREF _Toc517970849 \h 67 References PAGEREF _Toc517970850 \h 68 1. Introduction Introduction: Portfolio management system is the most essential and important part of any of the financial management sector. The financial world is too much dynamic and it has scope to invent more and more for the new investors. Financial sector always works on the functionalities of the fundraising techniques. The total finance sector is based on two of the portfolio management system which is Active portfolio management and passive portfolio management. According to Sicotte, Drouin Delerue (2014), multiple ways of handling the different portfolios are available in the market. Both of the portfolio management system has huge supporters. Inactive portfolio management system, there is an aim of gaining a huge amount of positive returns for the recent market. The aim of the particular portfolio management system is to find the mispriced assets from the market. This particular portfolio management is always preferable for the investors. Passive portfolio management is all about the index of the investing strategy. This technique usually follows the exact actions of a very particular index. In a particular finance index, stocks and securities are the main issues for the investors. These two particular criteria always lie on the same index. Depending on the analysis of those two portfolios management system a large number of researchers always works on the particular topic. According to Kaiser, El Arbi Ahlemann (2015), as portfolio management is the only criteria of making a good investment, the financial sector always get in touch with the recent development over the portfolio management system. Project Scope and Limitations Portfolio management is a non-ending process. It is always subjected to a dynamic activity in the finance sector. The performance of a particular portfolio management system is always be monitored by the finance sector. It always makes a comparison with the latest market condition. The objective of the investors is always the identification technique of the portfolio management system. Wu, Wermers Zechner (2016) opined that one of the main scopes of the portfolio management is to evaluate the total portfolio income which is based on two of the very important financial criteria namely targets and achievement. Investors always deal with the targets of the finance which turns into success when the targets are changes to achievement. Revision of the target portfolio is very important for the finance sector. The goal of the portfolio management is to make a proper investment in the market applying which a good market return is expected. Various scopes are there in the finance market whic h is directly linked with the portfolio management system. Investment Alternatives: Stocks, bonds, cash are the special type of investment which lies in the category of alternative investment. This particular investment type falls under the conventional investment type. According to Stettina Hà ¶rz (2015), most of the alternative investments are held by the institutional sectors. Alternatives investments also include hedge funds, private equity, real estate, derivatives contracts etc. Investment Analysis: Analysis of a proper investment is very much impor...