This study contributes to the debate on active and passive portfolio management by providing
an alternate means of constructing an active portfolio. This “fusion strategy” has
underpinnings in the realm of behavioural finance, namely the value-growth phenomenon and
the momentum effect. The fusion strategy developed in this study was compared against two
passive benchmarks and four active benchmarks. All returns are calculated net of transaction
costs, initially set to 1% per month per share. Statistical testing, done via stochastic
dominance, yielded inconclusive results in the majority of cases. The exception however, was
that Fund B stochastically dominated the fusion strategy at second order. This implies that a
risk-averse investor would prefer to invest in Fund B. By the use of Sharpe and Treynor
ratios, the results were also inconclusive. However, the Sortino ratio shows that the fusion
strategy outperforms all benchmarks chosen, except Fund A. The performance of the fusion
strategy was also not induced by either a sector rotation strategy, the existence of the January
effect or by the level of transaction costs.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/11584 |
| Date | 03 July 2012 |
| Creators | Seetharam, Yudhvir |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
Page generated in 0.0021 seconds