No abstract available. / Thesis (Ph.D.)-University of Durban-Westville, 1989.

Assignment (MComm)--University of Stellenbosch, 2001. / ENGLISH ABSTRACT: Rapid development of asset pricing models, asset return prediction models, information technologies, and the integration and globalisation of world economic markets, require the investor to have a fundamental understanding of the role of asset allocation (diversification) and the various strategies available in achieving investor's risk and return objectives. Assets are allocated across different asset classes in an attempt to optimise the combination of investment returns and investment risk. In this way your investment will not be subject to the volatility of anyone asset class alone. It is important to note that the movements of one class of assets (stocks, bonds or cash) may be somewhat offset by the non-correlated movement of a different class of assets. The intent of asset allocation is not necessarily to increase return as much as it is to fmd the accepted rate of return, while simultaneously reducing risk or maintaining it at a predefined level. This study explores the underlying theories concerning the relative importance of asset allocation in determining portfolio performance, and the three primary asset allocation strategies available. It also discusses relevant theory of how the predictability of asset returns and the investment horizon of a portfolio can have an impact on which asset allocation strategy to utilize in achieving the necessary risk and return objectives of the investor. / AFRIKAANSE OPSOMMING: Die toenemende ontwikkeling van bate prys modelle, modelle wat die opbrengs van bates vooruitskat, informasie tegnologie, asook die integrasie en globalisering van internasionale ekonomiese markte, vereis dat die investeerder 'n omvangryke kennis moet beskik oor die rol van bate allokasie (diversifisering) en die verskillende strategië beskikbaar tot die bereiking van investeerder risiko en opbrengs doelwitte. Bates word geallokeer tussen verskillende bate kategorieë (aandele, effekte of kontant) in die poging om die kombinasie tussen belegging opbrengste en belegging risiko te optimaliseer. Sodoende word die belegging nie blootgestel aan die onbestendigheid van slegs een bate kategorie nie. Daar moet gelet word dat die beweging van een kategorie van bates (aandele, effekte of kontant) teengewerk kan word deur die nie-korrelerende beweging van 'n ander kategorie van bates. Die voorneming van bate allokasie is nie noodwendig die toename van opbrengste nie. Daar word gestreef na die bereiking van 'n aanvaarbare opbrengskoers, terwyl risiko verminder word of volhou word op 'n voorafbepaalde vlak. Hierdie studie ondersoek die onderliggende teorieë rakende die relatiewe belangrikheid van bate allokasie om portefuelje opbrengste te kan bepaal, asook die drie primêre bate allokasie strategieë beskikbaar. Relevante teorie word bespreek, betreffende die vooruitskatting van bate opbrengste en die horison van 'n portefuelje, asook die impak wat beide het op die keuse van 'n geskikte bate allokasie strategie, om sodoende aan die nodige risiko en opbrengs doelwitte van die investeerder te kan voldoen.

This work covers a substantial mosaic of related concepts in utility theory as applied to financial decision-making. It reviews some of the classical notions of Benthamite utility and the normative utility paradigm offered by the von Neumann-Morgenstern expected utility theory; exploring its major pitfalls before moving into what is postulated as an entropic notion of utility. Extrinsic utility is proposed as a cardinally measurable quantity; measurable in terms of the expected information content of a set of alternative choices. The entropic notion of utility is subsequently used to model the financial behavior of individual investors based on their governing risk-return preferences involving financial structured products manufactured out of complex, multi-asset options. Evolutionary superiority of the Black-Scholes function in dynamic hedging scenarios is computationally demonstrated using a haploid genetic algorithm model programmed in Borland C. The work explores, both theoretically and computationally, the psycho-cognitive factors governing the financial behavior of individual investors both in the presence as well as absence of downside risk and postulates the concepts of resolvable and irresolvable risk. A formal theorem of consistent preference is proposed and proved. The work also analyzes the utility of an endogenous capital guarantee built within a financial structured product. The aspect of investor empowerment is discussed in terms of how financial behavior of an investor may be transformed if he or she is allowed a choice of one or more assets that may gain entry into the financial structured product. Finally there is a concluding section wherein the different facets are placed in their proper perspective and a number of interesting future research directions are also proposed.