<p>Why do people invest? People are insecure about their future welfare and aim for future guaranteed cash flows. To give ourselves a more thorough introduction to investments we decided to write our bachelor-thesis within the area of finance. This thesis will combine financial institutions and investments. It is a topic repeatedly discussed in the media and a study carried out in Sweden showed that in 2003, 80% of the population were shareholders.</p><p>When trading with stocks and shares there is risk involved that can be defined as the volatility in the cash flow of an investment. A portfolio is a collection of securities that an investor has placed capital in. In order to minimise the risk of the portfolio, the investor can diversify his or her portfolio, which involves investing in different securities in order to minimise risk. Institutional Theory will help us to see how these financial institutions interact with each other and what internal and external factors may influence their behaviour. Institutional investors; such as banks, are seen as large actors on the financial markets as they gain more and more control over the management of equities. It is necessary that intermediaries take care of their customers and inform them thoroughly about the rules of the investment game. With this as a background we felt it would be interesting to investigate the following problem.</p><p>On what basis do financial institutions create their customers’ portfolios and is the process the same across the branch as a whole?</p><p>In order to find an answer to this question; we have done a qualitative study with an overall positivistic influence. The study is based upon an analysis of the empirical material; collected through interviews with three financial institutions, grounded in theory in order to answer our specific question.</p><p>From the information gathered we understood that the first information financial institutions gather is personal information about the investors, which is needed to get a picture and an understanding about their client. We have also learned how important it is to understand risk, as it is the risk that will determine the composition of the portfolio for the investor. We could see with the help of the institutional theory that there is little space for differentiation and can therefore say that the financial institutions work in the same way in the advising of their clients and for the composition of their client’s portfolio.</p><p>Our results show that the basis for the creation of portfolios is more or less the same across the branches as a whole. The service given may differ, due to the competence and knowledge level of employees, between institutions but the end product is similar in all aspects.</p>

<p><strong>Title: </strong>Measuring and handling risk - How different financial institutions face the same problem</p><p><strong>Seminar date: </strong>4^th of June, 2010</p><p><strong> </strong></p><p><strong>Level: </strong>Bachelor thesis in Business Administration, Basic level 300, 15 ECTS</p><p><strong>Authors: </strong>Sarah Rörden and Kristofer Wille</p><p><strong>Supervisor</strong>: Angelina Sundström</p><p><strong>Subject</strong> <strong>terms:</strong> Risk variables, Risk measurement, Risk management, Modern Portfolio Theory, Diversification, Beta</p><p><strong>Target group: </strong>Everyone who has basic knowledge of financial theories and risk principles but lacks the understanding of how they can be used in risk management.</p><p><strong> </strong></p><p><strong>Purpose: </strong>To understand the different Swedish financial institutions’ way of handling and reducing risk in portfolio investing using financial theories.</p><p><strong>Theoretical framework: </strong>The theoretical framework is based on relevant literature about financial theories and risk management, including critical articles.</p><p><strong> </strong></p><p><strong>Method: </strong>A multi-case study has been conducted, built upon empirical data collected through semi-structured interviews at three different financial institutions.</p><p><strong> </strong></p><p><strong>Empiricism: </strong>The study is based on interviews with Per Lundqvist, private banker at Carnegie Investment Bank AB; Erik Dagne, head of risk management department and Joachim Spetz, head of asset management at Erik Penser Bankaktiebolag; and David Lindström, asset manager at Strand Kapitalförvaltning AB.</p><p><strong> </strong></p><p><strong>Conclusion:</strong> There is a practical implementation of the theoretical models chosen for this research. The numbers the financial models generate do not tell one the entire truth about the total risk, therefore the models are used differently at each study object. For a model to hold it has to be transparent, and take each model’s assumptions into account. It all comes down to interpreting the models in an appropriate way.</p>

<p>There is evidence that globalization, economic assimilation and integration among countries and their financial markets have increased correlation among stock markets and the correlation may in turn impact investors’ allocation of their assets and economic policies. We have conducted a quantitative study with daily stock index quotes for the period January 2000 and December 2009 in order to measure the eventual correlation between the markets of ASEAN+3. This economic integration consists of; Indonesia, Malaysia, Philippines, Singapore, Thailand, China, Japan and South Korea. Our problem formulation is:Are the stock markets of ASEAN+3 correlated?Does the eventual correlation change under turbulent market conditions?In terms of the eventual correlation, discuss: is it possible to diversify an investment portfolio within this area?The purpose of the study is to conduct a research that will provide investors with information about stock market correlation within the chosen market. We have conducted the study with a positivistic view and a deductive approach with some theories as our starting point. The main theories discussed are; market efficiency, risk and return, Modern Portfolio Theory, correlation and international investments. By using the financial datatbase, DataStream, we have been able to collect the necessary data for our study. The data has been processed in the statistical program SPSS by using Pearson correlation.From the empirical findings and our analysis we were able to draw some main conclusions about our study. We found that most of the ASEAN+3 countries were strongly correlated with each other. Japan showed lower correlation with all of the other countries. Based on this we concluded that economic integration seems to increase correlation between stock markets. When looking at the economic downturn in 2007-2009, we found that the correlation between ASEAN+3 became stronger and positive for all of the countries. The results also showed that the correlation varies over time. We concluded that it is, to a small extent, possible to diversify an investment portfolio across these markets.</p>

Title: Measuring and handling risk - How different financial institutions face the same problem Seminar date: 4th of June, 2010   Level: Bachelor thesis in Business Administration, Basic level 300, 15 ECTS Authors: Sarah Rörden and Kristofer Wille Supervisor: Angelina Sundström Subject terms: Risk variables, Risk measurement, Risk management, Modern Portfolio Theory, Diversification, Beta Target group: Everyone who has basic knowledge of financial theories and risk principles but lacks the understanding of how they can be used in risk management.   Purpose: To understand the different Swedish financial institutions’ way of handling and reducing risk in portfolio investing using financial theories. Theoretical framework: The theoretical framework is based on relevant literature about financial theories and risk management, including critical articles.   Method: A multi-case study has been conducted, built upon empirical data collected through semi-structured interviews at three different financial institutions.   Empiricism: The study is based on interviews with Per Lundqvist, private banker at Carnegie Investment Bank AB; Erik Dagne, head of risk management department and Joachim Spetz, head of asset management at Erik Penser Bankaktiebolag; and David Lindström, asset manager at Strand Kapitalförvaltning AB.   Conclusion: There is a practical implementation of the theoretical models chosen for this research. The numbers the financial models generate do not tell one the entire truth about the total risk, therefore the models are used differently at each study object. For a model to hold it has to be transparent, and take each model’s assumptions into account. It all comes down to interpreting the models in an appropriate way.

Why do people invest? People are insecure about their future welfare and aim for future guaranteed cash flows. To give ourselves a more thorough introduction to investments we decided to write our bachelor-thesis within the area of finance. This thesis will combine financial institutions and investments. It is a topic repeatedly discussed in the media and a study carried out in Sweden showed that in 2003, 80% of the population were shareholders. When trading with stocks and shares there is risk involved that can be defined as the volatility in the cash flow of an investment. A portfolio is a collection of securities that an investor has placed capital in. In order to minimise the risk of the portfolio, the investor can diversify his or her portfolio, which involves investing in different securities in order to minimise risk. Institutional Theory will help us to see how these financial institutions interact with each other and what internal and external factors may influence their behaviour. Institutional investors; such as banks, are seen as large actors on the financial markets as they gain more and more control over the management of equities. It is necessary that intermediaries take care of their customers and inform them thoroughly about the rules of the investment game. With this as a background we felt it would be interesting to investigate the following problem. On what basis do financial institutions create their customers’ portfolios and is the process the same across the branch as a whole? In order to find an answer to this question; we have done a qualitative study with an overall positivistic influence. The study is based upon an analysis of the empirical material; collected through interviews with three financial institutions, grounded in theory in order to answer our specific question. From the information gathered we understood that the first information financial institutions gather is personal information about the investors, which is needed to get a picture and an understanding about their client. We have also learned how important it is to understand risk, as it is the risk that will determine the composition of the portfolio for the investor. We could see with the help of the institutional theory that there is little space for differentiation and can therefore say that the financial institutions work in the same way in the advising of their clients and for the composition of their client’s portfolio. Our results show that the basis for the creation of portfolios is more or less the same across the branches as a whole. The service given may differ, due to the competence and knowledge level of employees, between institutions but the end product is similar in all aspects.

There are several authors Markowitz (1991), Elton and Gruber (1997) that discuss the main issues that an investor faces when investing, for example how to allocate resources among the variety of different securities. These issues have led to the discussion of portfolio theories, especially the Modern Portfolio Theory (MPT), which is developed by Nobel Prize awarded economist Harry Markowitz. This theory is the philosophical opposite of tradi-tional asset picking. The purpose of this thesis is to investigate if an investor can apply MPT in order to achieve a higher return than investing in an index portfolio. Combining a strong portfolio that beats the market in the longrun would be the ultimate goal for most investors. The theories that are used to analyze the problem and the empirical findings provide the essential concepts such as standard deviation, risk and return of the portfolio. Further, diversification, correlation and covariance are used to achieve the optimal risky portfolio. There will be a walk-through of the MPT, with the efficient frontier as the graphical guide to express the optimal risky portfolio. The methodology constitutes as the frame for the thesis. The quantitative method is used since the data input is gathered from historical data. This thesis is based on existing theories, and the deductive approach aims to use these theories in order to accomplish a valid and accurate analysis. The benchmark that is used to compare the results from the portfolio is the Stockholm stock exchange OMX 30. This index mimics and reflects the market as a whole. The portfolio will be reweighed at a preplanned schedule, each quarter to constantly obtain an optimal risky portfolio. The finding from this study indicates that the actively managed portfolio outperforms the passive benchmark during the selected timeframe. The outcome someway differs when evaluating the risk adjusted result and becomes less significant. The risk adjusted result does not provide any strong evidence for a greater return than index. Finally, with this finding, the authors can conclude by stating that an actively managed optimal risky portfolio with guidance of the MPT can surpass the OMX 30 within the selected timeframe.

<p>There are several authors Markowitz (1991), Elton and Gruber (1997) that discuss the main issues that an investor faces when investing, for example how to allocate resources among the variety of different securities. These issues have led to the discussion of portfolio theories, especially the Modern Portfolio Theory (MPT), which is developed by Nobel Prize awarded economist Harry Markowitz. This theory is the philosophical opposite of tradi-tional asset picking.</p><p>The purpose of this thesis is to investigate if an investor can apply MPT in order to achieve a higher return than investing in an index portfolio. Combining a strong portfolio that beats the market in the longrun would be the ultimate goal for most investors.</p><p>The theories that are used to analyze the problem and the empirical findings provide the essential concepts such as standard deviation, risk and return of the portfolio. Further, diversification, correlation and covariance are used to achieve the optimal risky portfolio. There will be a walk-through of the MPT, with the efficient frontier as the graphical guide to express the optimal risky portfolio.</p><p>The methodology constitutes as the frame for the thesis. The quantitative method is used since the data input is gathered from historical data. This thesis is based on existing theories, and the deductive approach aims to use these theories in order to accomplish a valid and accurate analysis. The benchmark that is used to compare the results from the portfolio is the Stockholm stock exchange OMX 30. This index mimics and reflects the market as a whole. The portfolio will be reweighed at a preplanned schedule, each quarter to constantly obtain an optimal risky portfolio.</p><p>The finding from this study indicates that the actively managed portfolio outperforms the passive benchmark during the selected timeframe. The outcome someway differs when evaluating the risk adjusted result and becomes less significant. The risk adjusted result does not provide any strong evidence for a greater return than index. Finally, with this finding, the authors can conclude by stating that an actively managed optimal risky portfolio with guidance of the MPT can surpass the OMX 30 within the selected timeframe.</p>

There is evidence that globalization, economic assimilation and integration among countries and their financial markets have increased correlation among stock markets and the correlation may in turn impact investors’ allocation of their assets and economic policies. We have conducted a quantitative study with daily stock index quotes for the period January 2000 and December 2009 in order to measure the eventual correlation between the markets of ASEAN+3. This economic integration consists of; Indonesia, Malaysia, Philippines, Singapore, Thailand, China, Japan and South Korea. Our problem formulation is:Are the stock markets of ASEAN+3 correlated?Does the eventual correlation change under turbulent market conditions?In terms of the eventual correlation, discuss: is it possible to diversify an investment portfolio within this area?The purpose of the study is to conduct a research that will provide investors with information about stock market correlation within the chosen market. We have conducted the study with a positivistic view and a deductive approach with some theories as our starting point. The main theories discussed are; market efficiency, risk and return, Modern Portfolio Theory, correlation and international investments. By using the financial datatbase, DataStream, we have been able to collect the necessary data for our study. The data has been processed in the statistical program SPSS by using Pearson correlation.From the empirical findings and our analysis we were able to draw some main conclusions about our study. We found that most of the ASEAN+3 countries were strongly correlated with each other. Japan showed lower correlation with all of the other countries. Based on this we concluded that economic integration seems to increase correlation between stock markets. When looking at the economic downturn in 2007-2009, we found that the correlation between ASEAN+3 became stronger and positive for all of the countries. The results also showed that the correlation varies over time. We concluded that it is, to a small extent, possible to diversify an investment portfolio across these markets.

This paper examines data for 12,868 individuals from the National Longitudinal Survey of Youth (NLSY79) from 1979 through 2010 to explore certain financial incentives of marriage. In particular, this paper focuses on identifying the combination of occupations that decreases idiosyncratic income volatility to the greatest extent. For the sake of this paper, marriage is defined as the combination of two separate assets into a single portfolio. With such, I derive the efficient frontier for each occupation and gender. In the process, reward-to-volatility and mean-variance utility maximization techniques are introduced. Ultimately, applying modern portfolio theory to the marriage market allows one to examine the economic incentives of marriage in a way that has not previously been done. On the whole, the analysis confirms previous literature on marriage dynamics, while offering a new framework for analysis.

The theme of this thesis is comparison of mutual funds from international perspective.The funds compared are situated in countries of the European Union and the United States of America. The funds of the EU are situated in these countries: Germany, France, Great Britain, and the Czech Republic. The comparison was done in five-year term, and three-year term. To compare the funds, the theory of modern portfolio was applied. The funds were compared on basis of returns, risk and risk-to return.