REFLECTION ON COURSE PAPER Assignment Example | Topics and Well Written Essays - 500 words

REFLECTION ON COURSE PAPER - Assignment Example However, once the course started, the various readings that were considered, writings that were undertake, and discussions that were had proved that I was going to get more than I expected. Even though my academic ambitions for the course were satisfied, much more were going to be gained for my professional involvement and this is what this reflection paper seeks to bring to bear. As part of the reflection paper therefore, I am going to discuss and scrutinize some new ideas and perspectives that were learned as part of the readings, writings and discussions on the course that was undertaken. Generally, the ideas and perspectives are rooted in the principles of resonance and leadership that was learned. Later, way in which the ideas gained have helped in bringing about a professional transformation to me shall also be treated. The very first new idea that I have learned from the course is rooted in the principle that world-class performers work hard to create their dreams (Tabachnick and Fidell, 2001). Commonly, people tend to have a notion that success comes to people by accident or through luck. They hardly realize that success is a well calculated plan that is executed when key strategies and structures are put in place (Byrne, 2011).

Inside and Out Essay Example for Free

Inside and Out Essay A Compare/Contrast Essay about the advantages and disadvantages of  hanging out at home vs. going out to have a good time as a young adult. We all like to have a good time. Whether it is with our friends, significant others, or our families, we all need to relax. Being a young adult myself I have learned to make wiser decisions about my party time based on prior experiences. After having gone to the clubs, the bars, the pool halls, and the raves I now know that where the real party is at is inside the comfort of your own home where you are the one in control and are not subject to some of the expenses that going out can bring. I think the biggest two aspects that I have to decide between now in my life is going out to dinner and a movie versus hanging out with the same people at the house. Being in control means not getting yourself into predicaments that you normally wouldnt put yourself in. The first predicament I can think of putting myself in when going out is my money situation. Being the young person that I am I have not been given the opportunity yet in my life to be making the mega bucks. Thirty to Forty dollars a night to go to dinner and a movie may not seem like much to some, but for someone who makes on average two-hundred dollars a week and has some hefty bills to pay, thats a big deal. Why would someone want to go out, spend twenty dollars on dinner then $8.50 per person on a movie when they could just as easily stay home rent a movie for about $4.00 for everyone to watch, and cook a meal that cost twenty dollars to feed everyone? On the other hand, when you do go out, although you do spend a little more, it is also a less time-consuming process and easier on the host or hostess. Instead of having to go to the store to get the ingredients for dinner, going to rent a movie then coming home and preparing dinner, you instead just scout from place to place and do what you have to do. Also, going to a restaurant can be a little relaxing from time to time because you have someone to serve you and you have nothing to worry about but basking in good  conversation. There is no mess to pick up or dishes to do once the dinner is over. Another advantage would be that at the theater there is a bigger screen. Im not too sure if bigger is better to everyone, but I do enjoy a good theater flick from time to time on those oversized screens. Also, when in the theater you get to savor the rich buttery popcorn that only the theater can provide, although it costs another pretty penny. Another great advantage to staying in is the people. Its such a good time when you have people who are appreciative of you as their host or hostess. Renting a good film and serving a fabulous meal is the epitome of a good night for me and my family and friends. Be it a nice southern barbeque dinner or fancy chicken cordon bleu that I prepare, it seems as though my guests always feel satisfied. It makes a person feel good and is often times relaxing to realize that something theyre doing brings joy to others. To know that you are the one that put the smile on their face or the one who made sure they had a good day is an awesome feeling. Not many other feelings top that one for me. Whether you stay in or go out be sure to relax and have a good time. Thats really what being with the ones you love and care about is all about. Make sure to mix things up a bit so that it doesnt get too monogamous staying in. Also when going out make sure to take just enough money that you can afford to spend or youll wind up broke until pay day. Whatever it is that you do, make sure it is not stressful. Remember, having fun means relaxing, no matter how you do it.

Comparing Leadership Styles | Effect of Leadership Styles of Business

Comparing Leadership Styles | Effect of Leadership Styles of Business Any organization can not survive without a sound management system. The management and how to manage the company from an overall aspect is mainly established by a core person in this company and he/she is called the leader of this company. It is wide accepted that no company can be successfully without effective management and without a competent leader. Therefore, the leader of the company plays a vital role for the organization. Different leaders with different natures and characteristics may bring up completely different management theory to the company, which will also decide the developing model of the company and determine the success of failure of the company. The leadership style will greatly decide the companys development for the future. It is a careful decision who to be hired or selected to be in charge of the company and guide the strategy of the company. Therefore, in order to analyze how the role of leader plays in an organization, two different leaders have been selec ted in this report. The objective of this report is to analyze leadership styles by selecting two leaders from two companies. One is Carly Fiorina with HP Company, and the other one is Michael T. Duke with Wal-Mart Company. These two different leaders are different in their leadership in many ways and the differences between their leadership approaches are demonsrtated in the critical analysis section. In the end the conclusion of the effectvie leadership is made based on the findings of the two cases. 2.0 Introduction As to the development of a company, the importance of the leader is obvious to the whole company. With reference to each successful enterprise, it is obvious that there is an outstanding leader guiding an excellent team, such as Jack Welch with GM Corporation America and Chinese Zhang Ruimin, leader of Haier Company and so on. Therefore, whether a company will be successful or not is greatly connected with who is leading the company. As the leadership topic is mentioned, this report is going to focus on the leadership in an organization. In this report, two famous leaders have been chosen and discussed from HP and Wal-Mart Companies in terms of their ways of leading the company and the major characteristics they have which may affect their ways regarding managing the team and the company. Based on the findings of the case study, comparison and contrast of both leaders with respect to their managing styles and leader style will be analyzed. At last, reasonable and information-based co nclusion related to leader management will be drawn. 3.0 Leader 1 Carly Fiorina with HP Company Hewlett-Packard Development Company, L.P. which is HP company for short and established in United States in 1939, is a company specialized in developing and manufacturing computers, printers, software and other digital fields. HPs Corporate Objectives which was written by co-founders Bill Hewlett and Dave Packard have guided the company for decades. The objective is It is necessary that people work together in unison toward common objectives and avoid working at cross purposes at all levels if the ultimate in efficiency and achievement is to be obtained. HP Company has been developed very fast in technology areas and expanded to the worldwide. In anywhere you can see HP logo and its products in everywhere. HPs development and success can not be real without excellent leaders. Here Carly Fiorina as one of the excellent and competent CEOs is selected to analyze for the purpose of explaining the relation between a leader and company success. Carly Fiorina was born in 1954 and graduated from Stanford University. In 1999, she was presented as the CEO of HP company and ended as the CEO role in 2005. Carly Fiorina is a very competent leader. Before she took the CEO position, HP Company was encountering years of depressing time, especially in the years of 1997 and 1998, the company faced the unprecedented difficulties and the sales income was far behind its expectations. Fiorina started her career in business as a receptionist, but later she jumped very fast to the positions of management and leadership. Fiorina is also a very excellent communicator and her speech is convincing the same as the Ex-president Bill Clinton. Carly Fiorina was the first female CEO in HPs history (Carlys biography, 2010). During her stay with role of CEO in HP, she has developed comprehensive skills in leadership which include planning, delegating, decision making, coordinating and communication. She brought a lot of changes to HP and turned the HP ways into the Carly way (Forsyth, 2006). Carly Fiorina is characterized with board decision making and brave in taking actions. When made the merger with Compaq Company with a 25 billion USD in 2001, it was a broad step for taking. In terms of leadership style, Carly Fiorina could be determined as authoritarian in controlling and regulating policy, procedures within the company. Besides this leadership feature, she should also be concluded to be equipped with democratic leadership style (Sprenger, 2010). Carly Fiorinas leadership styles are most cultivated by her personalities. She is very diligent and hard working at the same time she is also good at selling. She stands very calm in any situation and is good at calculating and thinking. She is very dedicated to the pursuit of goals that she thinks that it is well-intentioned. She is very persistent with things. In Fiorinas view, every person is capable of far more than they realize. Fiorina holds this view in her life and applies it into her management. She is capable of digging and encouraging her teams ability. Some of her team workers feel very thankful to her, because she gave the chance to them to realize who they were and what they could do and where the y could reach in the future. With this characteristic, it is good to gather people and make them work hard to achieve the goal. Fiorina likes to engage activities personally which is another factor contributing to her successful leadership (Sadler, 2003). After she took the position as CEO, she started her trips to anywhere the HP covers and to investigate the problems and potentials there. She is very responsible for her position. She is persistent in doing the right things, for the right reasons and the right way, most of the time; it will turn out all right. When she was with HP Company, she will never give up what she thinks is a right choice or decision and she will lead her team to go for it. Thanks to Carly Fiorinas effective leading approach, HP Company has grown and developed very fast and achieved with the most important merger in HP history. During the period she took the leadership in HP Company, HP expanded very quickly to the world and its market share has grown. Compared with the developing and expanding and profit making situation before Fiorina as CEO, HP has made great success in terms of both self-development and its fast expansion to overseas markets. However, although Carly Fiorinas leadership has brought HP benefits in a range of areas, she was still not welcomed by all people within the company. Her leading behavior was not always appreciated by HP board (House and Price, 2009). Carly Fiorina holds her direction was right for HPs development for long term; however, other HP board worried about the direction of HP under Fiorinas leading. And also because Fiorina is a female leader, to some extent, most males are not really accepted the fact of being manage d or controlled by a female. Plus Fiorina is a relatively authorized person with respect to management. Therefore, in 2005, Carly Fiorina finished her CEO life within HP Company. 4.0 Leader 2 Michael T. Duke with Wal-Mart Company Wal-Mart as one of the worlds largest retailers has developed and expanded very fast. It has now expanded to many other countries and has occupied a relatively large retail market share there. Wal-Mart has thousands of products where consumers can find their various needs. The company now is continuing to broaden and accelerate its global efforts on sustainable development and responsible sourcing and opportunities. Until April this year, Wal-Mart has established businesses in 14 countries besides its businesses in United States. There are more than 4000 stores running around the world. Compared with the finance statement in 2009, the sales incomes in overseas markets have broken through 100 billion US dollars (Charles, 2009). Mike Duke is the president and CEO of Wal-Mart Stores, Inc. As CEO, Mike leads a strong management team that is focused on keeping Walmarts mission of saving people money so they can live better relevant to every customer, every day. Mike Duke joined Walmart in 1995. Mike has taken various positions in Wal-Mart before he reached his current position as the leader of Wal-Mart. He has led the divisions of logistics, distribution and administration. He was capable and active in developing and executing corporate strategy. Duke is a low-key person which is very consistent with Wal-Mart style. He does not like to flaunt. The only leisure hobby of Duke is to play Golf. Duke is the fifth CEO of Wal-Mart. He is appointed by the previous CEO, Scot Lee. Lee appreciates Duke very much. Some people comment that Lee and Duke are very similar in their personalities and management. The most distinguished difference is Duke is better at social relations with people. From Dukes colleagues view, he is a considerate person as loyal to friendship and helpful to others. As a senior manager of Wal-Mart, Duke is very clear when to start a fight for Wal-Mart business growth. One retail analyst has commented that Duke is very ambitious. The development strategy held by Duke is that Wal-Mart must occupy the leading position in the retail industry. Therefore, Duke made decision to withdraw Wal-Mart from Germany and South Korea where the sales are not desirable. And also he decided to hold 95.1% of stake from the previous 50.9% of its subsidiary Japanese company Seiyu Department Store. At that time, every one warned that it might be a very high-risk decision, but Duke believed that as long as Wal-Mart gets more control stake, it will make things different. As a successful leader, you must be competent in the areas you exert in. The competence areas such as envision, involving and goal-oriented. Duke is experienced in the management field. Before he joined Wal-Mart, he was an executive at Federated and May Department Stores for 23 years. And before he took CEO role, he was engaged in various sectors in Wal-Mart, which enabled him the wide knowledge about the whole operation in the Wal-Mart. And also from the change perspective speaking, leaders should have the ability of responding to and managing the external changes. When Duke saw Wal-Marts poor sales in Germany, he made the broad step to withdraw from the Germany market. Personal characteristics and behaviors also contribute to be a successful leader or not. Duke gives his colleagues an impression of friendly and kind and easy-going, which does not mean he is not strict or decisive. On the contrary, Duke has the talent of gathering his employees and also has a clear direction where the company shall develop into. Duke made commitment that in order to make up the bad sales in American local market; Wal-Mart would fasten its pace in expanding to other potential overseas markets. He said to his employees that the anticipation is to attract more consumers and set up more stores world widely and accelerate Wal-Mart global expansion. For Wal-Mart, Dukes presence as the CEO is like change blood to Wal-Mart. Firstly, it was the very right time for Duke to take the position after the depressing year in 2008. Secondly, due the change of the political leader in United States, Wal-Mart had to choose a different CEO the represent a different Wal-Mart to the whole America Society. Because the political environment sounds not advantageous to Wal-Mart since Democratic Party won the election. In the previous years , Wal-Mart was supporting the Republic Party with its 85% amount of political capital went to Republican and just 15% left to Democratic Party. Duke may have to transfer its political policy within the organization for seeking a better development in its local market. Therefore, Despite Dukes leadership style will probably bring a bright future to Wal-Mart; Duke will definitely meet new challenges in this position. Under Dukes leading, because Duke is paying highly attention to his employee staff, it will be easy to gather and establish competent team. Also due to Dukes rich experience working the stores Company and his working experience in various sector of Wal-Mart for years, Duke has a very comprehensive view over the overall company developing. However, everything has its two sides. Although Wal-Mart may have the potential of grasping a good chance to develop and expand under Dukes leading approach, there are also potential challenges or disadvantages posed to its development. 5.0 Critical analysis-comparison and contrast between the two leaders with respect to their leadership styles 5.1 Differences in personal characteristics Carly Fiorinas characteristics: Somebody was born to a competitive, such as Carly. She has extraordinary passion, confidence, courage and endurance. In order to achieve goals that can endure hard to imagine the enormous pressures and challenges, even troubled, still self-improvement and never give up. Carly is an insightful strategist, led by her customers and makes the management of excited and kind, but also to carry out different tactics to ensure the smooth realization of goals. Carlys distinct personality made her very difficult to achieve harmonious, peaceful way to deal with things, so she makes many people feel hurt. While she was taking the reforms of HP Company, she also encountered difficulties in the realization of the merger plan. Carlys extraordinary will and unyielding personalities support her to become successful in her career. But at the same time, most of her colleagues do not agree with her in terms of the direction of the development etc. Thus in 2005, company board has fired her as CEO of HP. Michael T. Dukes personal characteristics Duke is a Georgia man, in his spare time; he and his wife did a lot of charity work. For example, they have been taken care of an orphan until finally found the orphan with an adoptive family. He is a low-key person. This moderate character is very easy to integrate into the Wal-Marts way of treating its employees and Wal-Marts humane enterprise culture. Although Duke has been regarded as a good and kind person in the industry, this does not mean his is not a strict man. Actually his work style of being slightly conservative but strategic is very good and helpful for promoting the smooth development of Wal-Mart. The difference in character between these two leaders is obvious, Carly positive attitude is very positive in work. Her enthusiasm for work is the key to her success in her career. However, being sometimes too tough and persistent and anxious to be successful often cause great resistance to the development. Carly belongs to the authoritarian leadership style. For HP Company during its depressing time before Carly took the CEO position, this passionate characteristic was very helpful for the company. Duke is moderate and communicative; Duke more belongs to the emotional intelligence leader type. He is easy-going and listening to others. He is the type of leader who affects his employees by emotionally. 5.2 Different in their reforming pace as leaders of the companies. Carlys reform of the HP, focused on control of the company, focused on adjusting strategy and simplifying the companys structures. Company just needs to keep useful functional departments. She made HP into four groups, which improved work efficiency a lot. Employees felt the sense of urgency in doing their jobs. Carly emphasizes on efficiency. She firmly believed that if she could correct the mistakes of HP made in the past few years, the company will become strong and competitive again. She led HP to the pursuit of speed and passion, and meanwhile to distinguish HP from other competitors in the characters. During her remodeling process for Hewlett-Packard, other senior managers and ordinary employees did not show their disputes openly, but actually some disagreement was originated. Besides continuing implementing the past successful business strategies, Duke made several marketing strategies aiming to survive from the global financial crisis. These strategies, such as improving consumers shopping experiences, more special products included, are attracting more and more consumers. But compared to HP Company, Wal-Mart reforming is relatively conservative. 5.3 Team organization capability Carly has a remarkable ability to communicate. She is good at communicating with her employee personally. She always travels to visit HP worker in different places. And this communication is very essential for the establishing an effective team. However due to Carlys strict and sometimes tough personalities, it is not very easy for her to establish a loyal team. Especially in the reforming period, most of people do not like changes at the same time, gender is another unfavorable factor contributing to her difficulties in managing an effective team. Many people, especially for male workers, it is very uncomfortable to work under a female manager. In the Dukes eyes, the future of employees is Wal-Marts future. He emphasizes this point to his staff that Wal-Mart will continue to work to build a better life. Duke is very popular and respected by his employees. His attitude towards life and relationship with workers gains support from his employees. So for Duke, he is more capable of organizing an effective team. 6.0 Conclusion In conclusion, leader is the most important figure in an organization. When a person is hired as the leader of a company, he/she becomes the core part of the whole company. The way he/she adopts for leading the company will greatly affect the companys development. The leaders leadership approach is greatly influenced by his/her personal characteristics, her/his competencies and his/her culture values as well. Different leaders to manage a company may turn the company into a completely different one in terms of its developing direction, its company values or culture and so on. In this report, two different leaders with different companies have been introduced and analyzed regarding to their personalities, leadership styles. Through their respective contribution made to their companies, we can conclude that effective leader is very crucial for the development and direction of the company. In the comparing and contrasting part, the two leaders differences with respect to their leadershi p have been addressed and proper reasons have been investigated regarding the differences. The leadership styles can also affected from the organization variables. The leadership style will be affected by the external environmental changes, such as in the case of leader 2. The change of the leadership is to some extent forced by the economic times and political environment changes.

Management of Old-growth Forests in the Pacific Northwest Essay

Management of Old-growth Forests in the Pacific Northwest When westward expansion brought settlers to the Northwest in the 1800s, they discovered that coniferous trees â€Å"forty feet in circumference [that] shot two-hundred feet straight up† flourished in the forests of the Pacific coast (Ervin 55). These early pioneers found the opportunity for economic growth in logging these vast forests of towering trees unlike any they had seen before. Today, the timber industry still remains the backbone of economic support for Washington, Oregon, and northwestern California, but an inevitable conflict has arisen between humans and our environment. A struggle over the control of the use of the old-growth forests threatens the balance of the ecosystem and the stability of the economy in the Pacific Northwest. Each year, 55,000 acres of Northwest forest land succumb to chainsaws to feed the ever-increasing foreign and domestic demands for lumber (Time 21). To profitably satisfy these demands, old-growth trees, those of two hundred years or more, are sought by Northwest logging companies. At this rate, environmentalists believe the unique ecosystem created by old-growth forests is in danger of being destroyed. To protect the old-growth forests and the plants and animals found there, a reduction must be made in the amount of old-growth trees logged each year. Yet reducing the amount of logging in the Pacific Northwest decreases the current number of jobs involved in harvesting the forests and the revenue received by both the companies and the government for their processed logs. To fully understand the current conflict over the old-growth forests, we must look at what each side stands to lose and then suggest a possible balanced sol... ...reach an agreement before it is too late. At our current rate of logging, the old-growth forest, its ecosystem, and its loggers will disappear in less than 15 years (Watkins 12). References Abate, Tom. â€Å"Which bird is the better indicator species for old-growth forest?† Bioscience Jan. 1992: 8-9. Carey, Andrew, Janice Reid, and Scott Horton. â€Å"Spotted Owl Density in Northwest California.† Journal of Wildlife Management 54.1 (1990): 11-18. Davis, Phillip A. Congressional Quarterly 4 Sept., 1991: 2611-12. â€Å"Environment’s Little Big Bird.† Time 16 April 1990: 21. Ervin, Keith. Fragile Majesty. Seattle: The Mountaineers, 1989. Gup, Ted. â€Å"Owl vs. Man.† Time 25 June 1990: 56-65. Satchell, Michael. â€Å"The Endangered Logger.† U.S. News and World Report 25 June 1990: 27-29. Watkins, T. H. â€Å"The Boundaries of Loss.† Wilderness Spring 1991: 12-16.

Markowitz Portfolio Optimization Essay

Introduction Markowitz (1952, 1956) pioneered the development of a quantitative method that takes the diversification benefits of portfolio allocation into account. Modern portfolio theory is the result of his work on portfolio optimization. Ideally, in a mean-variance optimization model, the complete investment opportunity set, i.e. all assets, should be considered simultaneously. However, in practice, most investors distinguish between different asset classes within their portfolio-allocation frameworks. In our analysis, we view the process of asset allocation as a four-step exercise like Bodie, Kane and Marcus (2005). It consists of choosing the asset classes under consideration, moving forward to establishing capital market expectations, followed by deriving the efficient frontier until finding the optimal asset mix. We take the perspective of an asset-only investor in search of the optimal portfolio. An asset-only investor does not take liabilities into account. The investment horizon is 5 – 10 years and the opportunity set consists of twelve asset classes. The investor pursues wealth maximization and no other particular investment goals are considered. We solve the asset-allocation problem using a mean-variance optimization based on excess returns. The goal is to maximize the Sharpe ratio (risk-adjusted return) of the portfolio, bounded by the restriction that the exposure to any risky asset class is greater than or equal to zero and that the sum of the weights adds up to one. The focus is on the relative allocation to risky assets in the optimal portfolio. In the mean-variance analysis, we use arithmetic excess returns. Geometric returns are not suitable in a mean-variance framework. The weighted average of geometric returns does not equal the geometric return of a simulated portfolio with the same composition. The observed difference can be explained by the diversification benefits of the portfolio allocation. We derive the arithmetic returns from the geometric returns and the volatility. a) The CIO has sent some of the results you have done above to the IPC. After the members of the IPC perused the results, some of them asked the CIO to explain why the equal-weighted portfolio underperformed the mean-variance optimal portfolio for the periods studied. Explain to the CIO using only the whole period results. First, let’s quickly look at some of the values of the fields that are used to draw the capital allocation line. As an example to my explanation let’s go through 2 possible capital allocation lines from the risk-free rate (rf = 3.5%). The first possible CAL is drawn for naively diversified portfolio for the whole period with rf = 3.5%. The expected return for this portfolio is 0.006224053, and its standard deviation is 0.025002148, the reward-to-volatility ratio, which is the slope of the CAL is 0.132284095. The second CAL is drawn for the Optimal portfolio for the whole period with rf = 3.5%. The expected return for this portfolio is 0.009508282, and its standard deviation is 0.00734826, the re- reward-to-volatility ratio is 0.897030832. We can see from the numbers that the optimal portfolio does better than the naively diversified portfolio because the RTV is higher for the optimal portfolio. The reason for that is that we’ve identified the optimal portfolio of risky assets by finding the portfolio weights that result in steepest CAL. The CAL that is supported by the optimal portfolio is tangent to the efficient frontier. The bottom line is that we have chosen the optimal portfolio that has the portfolio weights that lie on the capital allocation line that is tangent to the efficient frontier. Which means a portfolio of risky assets that provides the lowest risk for the expected return and thus this selected portfolio is bound to outperform the naively diversified. b) The IPC has noticed that the optimal allocations of sub-period 1 and sub-period 2 are very different (based on different scenarios of target returns and investment limits). They asked why. Would you please explain (using the set of results for 3.5% risk free rate)? This entails an analysis of the economic conditions for different periods. The most important insight we get is that in a diversified portfolio, the contribution to portfolio risk of a particular security will depend on the covariance of that security’s return with those of other securities. If you see the correlation matrix for the 2 sub periods, we can see that the economic-wide risk factors have imparted positive correlations among the stock returns for Sub Period 2 (03 – 10). This was the time of economic crisis (08-10) and since most of the risk was economic, the optimal portfolio incorporates less risky assets. While the sub period 1 (95 – 03) went through a healthy growth period, had mostly firm specific risk and lesser economic risk. c) The CIO wants to propose investment limits on certain asset classes to the IPC for consideration, but the CIO may not be aware of the likely impact on the performance of the Fund. Since you have run some analysis above based on the proposed limits, present your analysis and make a recommendation regarding investment limits for the historical arithmetic average (target) return and the 6% p.a. target return. The fundamental concept behind MPT is that the assets in an investment portfolio should not be selected individually, each on their own merits. Rather, it is important to consider how each asset changes in price relative to how every other asset in the portfolio changes in price. The optimal portfolios derived from the analysis are tangency portfolios and represents the combination offering the best possible expected return for given risk level. If we change the investment limits it could result in sub-optimal portfolios. This can be easily from the tables from (comparing naà ¯ve allocation to optimal allocation): Optimal Portfolio: When we draw the CAL and the efficient frontier using the above values, we see that the weights in the optimal portfolio result in the highest slope of the CAL. We can see this with the improved reward-to-volatility ratio of the portfolios. We also saw from the analysis where we constrained the portfolio return to 6% pa, the weights of the optimal portfolio changed and the RTV was lower than the un constrained optimal portfolio. Constrained:Unconstrained: d) The CIO would like to test the sensitivity of the mean-variance optimization to a change in the portfolio target return. Since you have done some runs using the historical arithmetic average return and 6% p.a. target return, present what you’ve learned from your analysis to the CIO using your results. We have tested the sensitivity of the mean-variance analysis to the input parameters. Table below shows the impact on the optimal portfolio of an increase and a decrease in the expected volatility of an asset, all other things being equal. Note that a change in volatility affects both the arithmetic return and the covariance matrix. Again, this table demonstrates the sensitivity of a mean-variance analysis to the input parameters. An increase in expected volatility leads to a lower allocation to that asset class. High yield even vanishes completely from the optimal portfolio. It is noteworthy that commodities are hardly affected by a higher standard deviation. A decrease in volatility mostly leads to a higher allocation. Government bonds, despite their expected zero risk premium, add value due to the strong diversification benefit. In this analysis, they appear to be insensitive to a change in their expected volatility. Credits and bonds are quite similar asset classes and, in a mean-variance context, the optimal portfolio tends to incline towards one or the other. In short, the mean-variance analysis suggests that adding real estate, stocks and high yield to the traditional asset mix of stocks and bonds creates most value for investors. Assets| Optimal Portfolio| Optimal Portfolio (6%)| SPTR Index| 0| 0| RTY Index| 0| 0| MXEA Index| 0| 0.747626014| MXEU Index| 0| 0| MXEF Index| 0| 0| SPGSCITR Index| 0| 0| FNCOTR Index| 0.862665445| 0.179140105| H15T3M Index| 0| 0.05| WOG1| 0| 0| C0A0| 0| 0| H0A0| 0| 0| G0Q0| 0.137334555| 0.023233881| e) Could we use the optimal weights from a previous period, say sub-period 1 or sub-period 2 or the whole period, as the recommended asset allocation for the next 5 or 10 years? Explain your answer with the out-of-sample test results you have done. No, we cannot recommend asset allocation based on the out-of-sample test results. The in-sample MV efficient frontiers overestimate the return associated with portfolio optimization not only with respect to resampled efficiency but importantly with respect to out-of-sample investment performance. Even with good inputs, MV efficiency error maximizes the risk and returns inputs, creates upward biased estimates of future performance, and substantially underperforms resampled efficiency. f) Based on the above analyses, what lessons and implications can be learned from your analysis on the mean-variance portfolio optimization? Key lessons: The fundamental goal of portfolio theory is to optimally allocate your investments between different assets. Mean variance optimization (MVO) is a quantitative tool which allows you to make this allocation by considering the trade-off between risk and return. Markowitz Portfolio Optimization The single period Markowitz algorithm solves the following problem: Single Period Problem * Inputs: * The expected return for each asset * The standard deviation of each asset (a measure of risk) * The correlation matrix between these assets * Output: * The efficient frontier, i.e. the set of portfolios with expected return greater than any other with the same or lesser risk, and lesser risk than any other with the same or greater return. The Markowitz algorithm is intended as a single period analysis tool in which the inputs provided by the user represent his/her probability beliefs about the upcoming period. The expected return, standard deviation, and correlation matrix are computed using standard statistical formulae. The expected return represents the simple (probability weighted) average of the possible returns for each asset, and the standard deviation represents the uncertainty about the outcome. The correlation matrix is a symmetric matrix, with unity on the diagonal, and all other elements between -1 and +1. A positive correlation between two assets A and B indicates that when the return of asset A turns out to be above (below) its expected value, then the return of asset B is likely also to be above (below) its expected value. A negative correlation suggests that when A’s return is above its expected value, and then B’s will be below its expected value, and vice versa. Input Data Issues A major issue for the methodology is the selection of input data. The use of historical data provides a very convenient means of providing the inputs to the MVO algorithm, but there are a number of reasons why this may not be the optimal way to proceed. All these reasons have to do with the question of whether this method really provides a valid statistical picture of the upcoming period. The most serious problem concerns the expected returns, because these control the actual return which is assigned to each portfolio. Failure of underlying hypothesis When you use historical data to provide the MVO inputs, you are implicitly assuming that * The returns in the different periods are independent. * The returns in the different periods are drawn from the same statistical distribution. * The N periods of available data provide a sample of this distribution. These hypotheses may simply not be true. The most serious inaccuracies arise from a phenomenon called mean reversion, in which a period, or periods, of superior (inferior) performance of a particular asset tend to be followed by a period, or periods, of inferior (superior) performance. Suppose, for example, you have used 5 years of historical data as MVO inputs for the upcoming year. The outputs of the algorithm will favor those assets with high expected return, which are those which have performed well over the past 5 years. Yet if mean reversion is in effect, these assets may well turn out to be those that perform most poorly in the upcoming year. Error in the estimated mean Even if you believe that the returns in the different periods are independent and identically distributed, you are of necessity using the available data to estimate the properties of this statistical distribution. In particular, you will take the expected return for a given asset to be the simple average R of the N historical values, and the standard deviation to be the root mean square deviation from this average value. Then elementary statistics tells us that the one standard deviation error in the value R as an estimate of the mean is the standard deviation divided by the square root of N. If N is not very large, then this error can distort the results of the MVO analysis considerably. Summary The above discussion does not mean to imply that the Markowitz algorithm is incorrect, but simply to point out the dangers of using historical data as inputs to a optimization strategy. If you make your own estimates of the MVO inputs, based on your own beliefs about the upcoming period, single period MVO can be an entirely appropriate means of balancing the risk and return in your portfolio.

Free Essays on Surplus Value Theory

Surplus-Value Theory The increase over the original value of the money that is put into circulation is called by Marx surplus value. The fact of this "growth" of money in capitalist circulation is common knowledge. Indeed, it is this "growth" which transforms money into capital, as a special and historically determined social relation of production. Surplus value cannot arise out of commodity circulation, for the latter knows only the exchange of equivalents; neither can it arise out of price increases, for the mutual losses and gains of buyers and sellers would equalize one another, whereas what we have here in not an individual phenomenon but a mass, average and social phenomenon. To obtain surplus value, the owner of money must find in the market a commodity. Its consumption is labor, and labor creates value. The owner of money buys labor power at its value, which, like the value of every other commodity, is determined by the socially necessary labor time requisite for its production (example, the cost of maintaining the worker and his family). Having bought enough labor power, the owner of money is entitled to use it, that is, to set it to work for a whole day. (12 hours) Yet, in the course of six hours the worker creates product sufficient to cover the cost of his own maintenance; ("surplus" labor time), he creates "surplus" product, or surplus value, for which the capitalist does not pay. Therefore, from the standpoint of the process of production, two parts must be distinguished in capital: constant capital, which is expended on means of production (machinery, tools, raw materials, etc.), whose value, without any change, is transferred (immediately or part by part) to the finished product; secondly, variable capital, which is expended on labor power. The value of this latter capital is not invariable, but grows in the labor process, creating surplus value. Therefore, to express the degree of capital's exploitation of lab... Free Essays on Surplus Value Theory Free Essays on Surplus Value Theory Surplus-Value Theory The increase over the original value of the money that is put into circulation is called by Marx surplus value. The fact of this "growth" of money in capitalist circulation is common knowledge. Indeed, it is this "growth" which transforms money into capital, as a special and historically determined social relation of production. Surplus value cannot arise out of commodity circulation, for the latter knows only the exchange of equivalents; neither can it arise out of price increases, for the mutual losses and gains of buyers and sellers would equalize one another, whereas what we have here in not an individual phenomenon but a mass, average and social phenomenon. To obtain surplus value, the owner of money must find in the market a commodity. Its consumption is labor, and labor creates value. The owner of money buys labor power at its value, which, like the value of every other commodity, is determined by the socially necessary labor time requisite for its production (example, the cost of maintaining the worker and his family). Having bought enough labor power, the owner of money is entitled to use it, that is, to set it to work for a whole day. (12 hours) Yet, in the course of six hours the worker creates product sufficient to cover the cost of his own maintenance; ("surplus" labor time), he creates "surplus" product, or surplus value, for which the capitalist does not pay. Therefore, from the standpoint of the process of production, two parts must be distinguished in capital: constant capital, which is expended on means of production (machinery, tools, raw materials, etc.), whose value, without any change, is transferred (immediately or part by part) to the finished product; secondly, variable capital, which is expended on labor power. The value of this latter capital is not invariable, but grows in the labor process, creating surplus value. Therefore, to express the degree of capital's exploitation of lab...