Email this article 
Hide
Show all
The Optimal Allocation for Capital Preservation: an Evidence Australian Portfolio
Abstract
This study analyzes optimal asset mix for Australian portfolios with the main investment objective for capital preservation. An alternative measure of risk of annual maximum drawdown has been used to reflect investor preference for capital preservation as opposed to conventional risk measure of standard deviation and variance. The contribution of the study is two folds. First, this study has put different perspective to look at portfolio risk in the view of capital preservation. Second, the optimal weight for asset class mix that minimizes annual maximum drawdown has been analyzed for the case of Australian market. The results suggest that for capital preservation, investors should expect lower returns and need to put a greater allocation on less risky assets such as cash or bond. To this end, cash and bond have provided stable long term annual returns along with contained level of annual maximum drawdowns. In contrast, when investors demand higher expected return, they should increase asset allocation into stocks (equities) market at the expense of higher maximum drawdowns.
Bahasa Indonesia Abstrak: Studi ini menganalisis bauran aset optimal untuk portofolio Australia dengan tujuan investasi utama untuk pelestarian modal. Ukuran alternatif risiko penarikan maksimum tahunan telah digunakan untuk mencerminkan preferensi investor untuk pelestarian modal dibandingkan dengan ukuran risiko konvensional standar deviasi dan varians. Kontribusi dari penelitian ini adalah dua lipatan. Pertama, penelitian ini telah menempatkan perspektif yang berbeda untuk melihat risiko portofolio dalam pandangan pelestarian modal. Kedua, bobot optimal untuk campuran kelas aset yang meminimalkan penarikan maksimum tahunan telah dianalisis untuk kasus pasar Australia. Hasilnya menunjukkan bahwa untuk pelestarian modal, investor harus mengharapkan pengembalian yang lebih rendah dan perlu menempatkan alokasi yang lebih besar pada aset yang kurang berisiko seperti uang tunai atau obligasi. Untuk tujuan ini, uang tunai dan obligasi telah memberikan pengembalian tahunan jangka panjang yang stabil bersama dengan tingkat penarikan maksimum tahunan. Sebaliknya, ketika investor meminta pengembalian yang diharapkan lebih tinggi, mereka harus meningkatkan alokasi aset ke pasar saham (ekuitas) dengan mengorbankan penarikan maksimum yang lebih tinggi
Keywords
DOI: http://dx.doi.org/10.19166/derema.v13i1.605
Full Text
PDFReferences
Abarbanell, J., & Bushee, B. (1998). Abnormal returns to a fundamental analysis strategy. The Accounting Review, 73(1), 19.
Barberis, N. (2000). Investing for the long run when returns are predictable. Journal of Finance, 55(1), 225–264. https://doi.org/10.1111/0022-1082.00205
Brinson, G. P., Hood, L R., & Beebower, G. L. (1995). Determinants of portfolio performance. Financial Analysts Journal, 51(1), 133–138. https://doi.org/10.2469/faj.v51.n1.1869
Bellante, D., & Green, C. A. (2004). Relative risk aversion among the elderly. Review of Financial Economics, 13(3), 269–281. https://doi.org/10.1016/j.rfe.2003.09.010
Bodie, Z. (2015). Thoughts on the future: life-cycle investing in theory and practice (Author abstract). Financial Analysts Journal, 71(1), 43. https://doi.org/10.2469/faj.v71.n1.6
Brinson, G. P., Singer, B. D., & Beebower, G. L. (1991). Determinants of portfolio performance II: An update. The Financial Analysts Journal, 47(3). https://doi.org/10.2469/faj.v47.n3.40
Fabozzi, F. J., Markowitz, H. M., Kolm, P. N., & Gupta, F. (2011). Portfolio selection. In F. J. Fabozzi & H. M. Markowitz (Eds.), The Theory and Practice of Investment Management. https://doi.org/10.1002/9781118267028.ch3
Frankel, R., & Lee, C. M. C. (1998). Accounting valuation, market expectation, and cross-sectional stock returns. Journal of Accounting and Economics, 25(3), 283–319. https://doi.org/10.1016/S0165-4101(98)00026-3
Furey, M. (2015). The importance of asset allocation in Australia. Delta Research and Advisory.
Hoesli, M., & Foort, H. (2003). The maximum drawdown as a risk measure: The role of real estate in the optimal portfolio. IDEAS Working Paper Series, European Real Estate Society (ERES). https://ideas.repec.org/p/arz/wpaper/eres2003_172.html
Hong, K. J., Peng, B., & Zhang, X. (2015). Capturing the impact of unobserved sector‐wide shocks on stock returns with panel data model. Economic Record, 91(295), 495–508. https://doi.org/10.1111/1475-4932.12208
Ibbotson, R. G., & Kaplan, P. D. (2000). Does asset allocation policy explain 40, 90, or 100 percent of performance?. Financial Analysts Journal, 56(1), 26–33. https://doi.org/10.2469/faj.v56.n1.2327
Iwaisako, T. (2003). Household portfolios in Japan. Cambridge, MA: National Bureau of Economic Research. https://doi.org/10.3386/w9647
Jappelli, T. (2000). Household portfolios: An international comparison. Naples, Italy: University of Naples: Centre for Studies in Economics and Finance (CSEF).
Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian investment, extrapolation, and risk. Journal of Finance, 49(5), 1541–1578. https://doi.org/10.1111/j.1540-6261.1994.tb04772.x
Ohlson, J. A. (2001). Earnings, book values, and dividends in equity valuation: An empirical perspective. Contemporary Accounting Research, 18(1), 107–120. https://doi.org/10.1506/7TPJ-RXQN-TQC7-FFAE
Siegel, J. J. (2002). Stocks for the long run: The definitive guide to financial market returns (2nd ed.). New York. Retrieved from http://books.google.com/books?id=RmPQGSawe7MC&pgis=1
Smith, D. M., Fauger̀e, C., & Wang, Y. (2013). Head head and shoulders above the rest the performance of institutional portfolio managers who use technical analysis. Research in Finance, 29, 167–189. https://doi.org/10.1108/S0196-3821(2013)0000029010
Viceira, L., & Campbell, J. (2001). Who should buy long-term bonds? American Economic Review, 91(1), 99-127. http://nrs.harvard.edu/urn-3:HUL.InstRepos:3128709
Cited by
- There are currently no citations to this article.
Copyright (c) 2018 Riznaldi Akbar
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Department of Management | Business School | Universitas Pelita Harapan | Indonesia | +62 21 546 0901 | jurnal.derema@uph.edu