Thompson Asset Management Essay

2090 Words Nov 15th, 2014 9 Pages
Executive Summary Based on the case “Thompson Asset Management” from HBS Professor William Fruhan and writer John Banko, this group exercise has the purpose to discuss various investment philosophies and consider the advantages of quantitative investing, especially technical analysis. Moreover, it should discuss the return variability and risk/return characteristics of the “Thompson Asset Management” funds, the ProIndex and the ProValue funds, regarding its returns, absolute and relative risks, as well as its risk relative to a benchmark index. The way to rebalance the ProValue fund should also be assessed as well as the improvements that can be done in order to improve the rebalancing …show more content…
Besides this, there is no need to hire as many analysts and portfolio managers. It is also important to bear in mind that quantitative investing strategy is based on historical data that do not include future events and although models are constantly updated in order to predict abnormal market events, it is not possible to do it

Financial Investments: Group Exercise 2 – Page 2

every time. Likewise, high turnover generated when the economy faces a greater‐than‐ average volatility, creates high costs such as commissions and taxable events. In this strategy we can refer to technical analysis that bases its work on price movements of securities. It is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Rather than focusing on analyzing the business of each company, technical analysts try to measure the “market sentiment” and predict and benefit from future movements of prices. Our opinion is that technical analysis by itself may fall short on fully understanding the real causes of price movements and predictions. On one hand, there is no strong rational reason to believe that past movements and tendencies will repeat indefinitely in the future. On the other hand, we believe that

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