Portfolio Management and Performance Valuation

The fundamental objective of this course is to provide students with a set of practical aspects associated with
investment concept for various risk profiles and their strategies conducive to achieving those objectives.
Specifically it is intended that the student is able to use the mainmethodologies for evaluating the performance
of a portfolio of securities and their managing.
After successfully completing this course, the student should be able to:
– Understand practical aspects essential for the management of a portfolio;
– Evaluate the performance of a portfolio

I. INTRODUCTION
Profitability, risk and diversification: definition,measurement and regression
Portfolio Theory: Markowitz’s model
Capital Asset Pricing Model (CAPM)
The market model
II. PORTFOLIO MANAGEMENT
Constitution of portfolios
Asset Mix: Classes of assets (expected return, variability and correlation)
Asset Allocation, portfolio diversification and appropriate benchmark
Passive management and active portfolio (management style)
Selection of operations (upside and downside) and trends moving the market (market timing)
Portfolio Tracking and exploiting anomalies
Multifactor models: factor betas
III. PORTFOLIO PERFORMANCE EVALUATION
Calculation of the profitability of portfolios:
Internal rate of return (IRR)
Performance Indicators Time-weighted andmoney-weighted
Hybrid Methods
Measures of Sharpe, Treynor and Jensen
Risk adjustment of portfolios
Benchmarks
Presentation of performance standards
Diagnostic performance and attribution

NAO

– Bodie, Z., Kane, A. and Marcus, A. (2004), Investments, 6th edition, McGraw-Hill.
– Carl R. Bacon (2009), Practical Portfolio Performance Measurement and Attribution, Second Edition, The Wiley
Finance Series.
– Elton, E. J., Gruber, M. J., Brown, S. J. And Goetzmann,W. N. (2002), Modern Portfolio Theory and Investment
Analysis, 6th edition, JohnWiley & Sons.
– Elton, Edwin J., Gruber, Martin J., Blake, R., Christopher (1996), Survivorship Bias and Mutual Fund
Performance, Review of Financial Studies, winter 9, 1097-1120.
– Estudos CMVM n.º 2, 2009. Comissão domercado de valores mobiliários
– Fama, E., (1970), Efficient capitalmarkets: a review of theory and empirical work. Journal of Finance 25, 383-
417.
– Fama, Eugene F., French, R., Kenneth (1993), Common risk factors in the returns on stocks and bonds, Journal
of Financial Economics 33, 3-56.
– Jensen, M., (1968), The performance of mutual funds in the period 1945-1964. Journal of Finance 23, 389-416.