This case examines the importance of forecasting expected returns in asset allocation decisions. While the case of MBA students aligned in one or portfolio management course, it is also appropriate for an advanced undergraduate course. It is from the perspective of a new employee in a small investment management company, which was written surprised by the stock market crash of 2008 and subsequent market recovery in 2009. The CIO of the company is to meet with an important client, to explain his … Read more »

This case examines the importance of forecasting expected returns in asset allocation decisions. While the case of MBA students aligned in one or portfolio management course, it is also appropriate for an advanced undergraduate course. It is from the perspective of a new employee in a small investment management company, which was written surprised by the stock market crash of 2008 and subsequent market recovery in 2009. The CIO of the company is to meet with an important client, to declare his asset allocation recommendations for 2008 and 2009 and suggest a new map for the future. He enlists the help of these new employees in the preparation of the materials for this presentation. The case, the student must have the ability of simple valuation ratios to predict returns to analyze. The students are predicted smoothed with a price-earnings ratio for future returns and given step-by-step instructions for analysis. In addition, students must make their results of a simple regression (two-asset) tactical asset allocation strategy in order to better understand the importance of forecasting expected returns for asset allocation decisions and how these predictions can be used to provide a simple tactical asset allocation model form. Students also examine the problems with performance measurement for a tactical asset allocation or market timing associated investment strategy.
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Richard B. Evans
Source: Darden School of Business
7 pages.
Release Date: 26 August 2009. Prod #: UV2563-PDF-ENG
Pravda asset management solution HBR case