Erlangga Nugrahabharata Eileen Chu. Templeton Growth Fund facts:  Introduced in November 1954  Goal: LT capital appreciation in global equities  Average.

Erlangga Nugrahabharata Eileen Chu

Templeton Growth Fund facts:  Introduced in November 1954  Goal: LT capital appreciation in global equities  Average return : 12.55% since inception  The last 10 years: 3.66%

1. Determine Optimal Portfolio (OP) Identifying countries and weights Measure performance 2. Determine Optimal Constrained Portfolio (OCP) With Floor and Cap

 Summary measures for Templeton- for the year of 2009  r temp : 8.82 %  β temp :. 98  RVOL temp :.0886 MarketWeightri σβri*β* RVOL US0.35480.073415.50.890.0260545670.31580.0808 UK0.14770.084322.51.10.0124516170.1625 France0.08990.094422.61.20.0084891790.1079 Switzerland0.06720.107618.50.930.0072298860.0625 Germany0.05770.095321.81.120.0054986760.0646 Netherlands0.04410.095519.11.070.0042097020.0472 South Korea0.03720.127339.41.320.0047351990.0491 Sweden0.06720.130124.190.780.008742720.0524 Italy0.02770.064725.41.060.0017929230.0294 Singapore0.01970.133029.41.170.0026194710.0230 Japan0.01820.1020220.990.001855540.0180 Spain0.01620.073122.51.20.0011836120.0194 Hong Kong0.00860.170336.11.180.0014646710.0101 Ireland0.0080.012722.71.090.0001019910.0087 Brazil0.00590.311453.71.490.0018372630.0088 Templeton0.9701 0.0882670180.97950.088585 *rf 2009 :.0015

1. Calculate RVOL for individual countries (RVOL i ) 2. Rank countries based on RVOL i 3. Calculate C* as the cutoff point 4. Calculate each countries weights in OP 5. Calculate OP performance

Marketri(r i -r f ) σβ RVOL i US0.07340.071915.50.890.0808 UK0.08430.082822.51.10.0753 France0.09440.092922.61.20.0774 Switzerland0.10760.106118.50.930.1141 Germany0.09530.093821.81.120.0837 Netherlands0.09550.094019.11.070.0878 South Korea0.12730.125839.41.320.0953 Sweden0.13010.128624.190.780.1648 Italy0.06470.063225.41.060.0596 Singapore0.13300.131529.41.170.1124 Japan0.10200.1005220.990.1015 Spain0.07310.071622.51.20.0596 Hong Kong0.17030.168836.11.180.1431 Ireland0.01270.011222.71.090.0103 Brazil0.31140.309953.71.490.2080 World0.0806113130.079114.69480.99790520.0793

Marketri(r i -r f ) σβ RVOL i Brazil0.31140.309953.71.490.2080 Sweden0.13010.128624.190.780.1648 Hong Kong0.17030.168836.11.180.1431 Switzerland0.10760.106118.50.930.1141 Singapore0.13300.131529.41.170.1124 Japan0.10200.1005220.990.1015 South Korea0.12730.125839.41.320.0953 Netherlands0.09550.094019.11.070.0878 Germany0.09530.093821.81.120.0837 US0.07340.071915.50.890.0808 France0.09440.092922.61.20.0774 UK0.08430.082822.51.10.0753 Italy0.06470.063225.41.060.0596 Spain0.07310.071622.51.20.0596 Ireland0.01270.011222.71.090.0103

 C*=C Japan = 0.09594 Market(r i -r f ) β RVOL σσ2εiσ2εi (r i -r f ) β i / σ 2 ε i σ2mβi/σ2εi Ci Brazil0.31141.490.208053.7 2,404.29 0.000193 0.19940 0.03474 Sweden0.13010.780.164824.19 453.74 0.000224 0.28954 0.06042 Hong Kong0.17031.180.143136.1 1,002.54 0.000200 0.29991 0.07448 Switzerland0.10760.930.114118.5 155.48 0.000644 1.20118 0.09104 Singapore0.13301.170.112429.4 568.76 0.000274 0.51972 0.09438 Japan0.10200.990.101522 272.36 0.000371 0.77707 0.09594 South Korea0.12731.320.095339.4 1,176.11 0.000143 0.31991 0.09598 Netherlands0.09551.070.087819.1 117.58 0.000869 2.10260 0.09386 Germany0.09531.120.083721.8 204.37 0.000522 1.32543 0.09241 US0.07340.890.080815.5 69.21 0.000944 2.47156 0.09008 France0.09441.20.077422.6 199.81 0.000567 1.55625 0.08861 UK0.08431.10.075322.5 244.96 0.000379 1.06663 0.08764 Italy0.06471.060.059625.4 402.53 0.000170 0.60276 0.08647 Spain0.07311.20.059622.5 195.30 0.000449 1.59218 0.08381 Ireland0.01271.090.010322.7 258.73 0.00005 0.99159 0.07943

Market βσ2εiσ2εi RVOL C*ZiWi Brazil1.49 2,404.290.2080 0.09594 0.000069 0.17119 Sweden0.78 453.740.1648 0.09594 0.000118 0.29196 Hong Kong1.18 1,002.540.1431 0.09594 0.000055 0.13672 Switzerland0.93 155.480.1141 0.09594 0.000108 0.26734 Singapore1.17 568.760.1124 0.09594 0.000034 0.08329 Japan0.99 272.360.1015 0.09594 0.000020 0.04950 0.000406 1.00000

MarketWeight%ri(r i -r f ) σβri*β*Weight RVOL op Brazil 0.171190.31140.309953.71.490.05330.2551 Sweden 0.291960.13010.128636.11.140.03800.3328 Hong Kong 0.136720.17030.168817.11.180.02330.1613 Switzerland 0.267340.10760.106118.50.930.02880.2486 Singapore 0.083290.13300.131529.41.170.01110.0974 Japan 0.049500.10200.1005220.990.00500.0490 OP 1.000000.159461.14430.13804  Summary measures for Optimal Portfolio (OP)  r op : 15.94%  β op :. 98  RVOL op :.1380

 OCP ANGGA  OCP CHU

 Maximize floor for US  Apply cap 6.5% to RVOL-ranked countries up to US

 Floor 35% for US  Apply cap 6.5% to RVOL-ranked countries up to Japan  International Diversification (keep all countries in the portfolio)  An Art not Science

 Summary measures for Optimal Portfolio (OP)  r ohu : 10.93%  β chu : 1.0316  RVOL chu :.1380 Calculate the performance of OCP chu MarketWeight%ri(r i -r f ) βri*β* RVOL* US0.350000.07340.07190.890.02570.3115 Brazil0.065000.31140.30991.490.02020.0969 Sweden0.065000.17030.16881.180.01110.0767 Hong Kong0.065000.10760.10610.780.00700.0507 Switzerland0.065000.10760.10610.930.00700.0605 Singapore0.065000.13300.13151.170.00860.0761 Japan0.065000.10200.10050.990.00660.0644 South Korea0.010770.12730.12581.320.00140.0142 Netherlands0.065000.09550.09401.070.00620.0696 Germany0.046230.09530.09381.120.00440.0518 France0.046850.09440.09291.20.00440.0562 UK0.034050.08430.08281.10.00290.0375 Italy0.015820.06470.06321.060.00100.0168 Spain0.036910.07310.07161.20.00270.0443 Ireland0.004380.01270.01121.090.000060.0048 OCPCHU1 0.10931.03160.10450

Portfoliorp β RVOL Temple Growth0.088270.980.0886 OP0.159461.140.1380 OCP Angga0.113181.040.1068 OCP Chu0.109311.030.1045 MSCI USA0.073430.890.0808 MSCI World0.080611.000.0793 Rank rp BetaRVOL 1OP 2OCP Angga 3OCP Chu 4Templeton GWorldTempleton G 5MSCI WorldTempleton GMSCI USA 6 MSCI World

 Gather 2010 data www.msci.com/products/indices/country_and_regional/all_country/perfor mance.html www.msci.com/products/indices/country_and_regional/all_country/perfor mance.html  Run the out of sample calculation for each country’s return, beta  Use the same weight of 2009  Calculate the portfolio performance (Templeton, OP, OCP, USA & World)

Index Level :Price Currency :USD Date/CountryFrance German y Netherla nd SWITZE RLANdUKUSA HONG KONGITALYJAPAN SINGAP ORESPAIN SWEDE NBRAZIL IRELAN DKOREA AC WORLD 2009-12-31102.240101.210103.730101.640102.560101.900102.030101.070100.700105.07097.49099.070101.230105.140108.330101.960 2010-1-2994.68092.240100.06098.24097.56098.23095.31092.520102.61098.72085.97096.60090.110100.490103.06097.500 2010-2-2692.48090.18095.340100.09095.620101.03098.97087.350103.72099.43079.50099.38094.09096.540101.90098.580 2010-3-3198.23098.340102.140104.950100.920106.920104.17093.710108.060103.61082.270106.240100.710103.290111.340104.680 2010-4-3093.16095.750100.59098.84099.550108.520101.19087.180107.850108.85078.190109.87099.360111.560117.600104.660 2010-5-3179.53084.26088.23087.91088.27099.55094.00072.83099.12098.56064.28094.36088.54089.430101.89094.380 2010-6-3078.05084.01087.63091.66086.09094.10096.70071.80097.100102.12063.96097.07084.57082.750102.83091.340 2010-7-3087.65091.99097.06096.07096.410100.560102.31083.170100.520110.14077.660108.42096.15088.460110.55098.670 2010-8-3182.21086.53089.61098.47094.02095.870103.07076.98098.190108.57073.160102.13092.70074.820107.56095.030 2010-9-3094.11098.000101.380103.840102.280104.420117.07085.620101.910117.17080.890121.050102.37079.360120.310103.910 2010-10-2998.900105.650103.080106.210106.150108.410119.50091.070103.990120.96084.320121.640103.64080.940122.140107.590 2010-11-3087.730100.28092.970102.380100.600108.270121.43076.530106.160118.87066.540118.27098.53074.320122.190105.010 2010-12-3195.350107.300103.080111.640107.860115.330122.10083.260114.150124.45072.740130.050105.05084.420135.720112.590 Monthly Ri 2010-1-29-7.394-8.863-3.538-3.345-4.875-3.602-6.586-8.4591.897-6.044-11.817-2.493-10.985-4.423-4.865-4.374 2010-2-26-2.324-2.233-4.7171.883-1.9892.8503.840-5.5881.0820.719-7.5262.8784.417-3.931-1.1261.108 2010-3-316.2189.0497.1324.8565.5435.8305.2547.2814.1844.2043.4846.9037.0366.9929.2646.188 2010-4-30-5.161-2.634-1.518-5.822-1.3581.496-2.861-6.968-0.1945.057-4.9593.417-1.3408.0075.622-0.019 2010-5-31-14.631-12.000-12.288-11.058-11.331-8.266-7.105-16.460-8.095-9.453-17.790-14.117-10.890-19.837-13.359-9.822 2010-6-30-1.861-0.297-0.6804.266-2.470-5.4752.872-1.414-2.0383.612-0.4982.872-4.484-7.4700.923-3.221 2010-7-3012.3009.49910.7614.81111.9876.8655.80115.8363.5227.85421.42011.69313.6936.9007.5088.025 2010-8-31-6.207-5.935-7.6762.498-2.479-4.6640.743-7.443-2.318-1.425-5.794-5.802-3.588-15.419-2.705-3.689 2010-9-3014.47513.25613.1355.4538.7858.91813.58311.2243.7897.92110.56618.52510.4316.06811.8549.344 2010-10-295.0907.8061.6772.2823.7843.8212.0766.3652.0413.2354.2400.4871.2411.9911.5213.542 2010-11-30-11.294-5.083-9.808-3.606-5.228-0.1291.615-15.9662.087-1.728-21.086-2.770-4.931-8.1790.041-2.398 2010-12-318.6867.00010.8749.0457.2176.5210.5528.7947.5264.6949.3189.9606.61713.59011.0737.218 r T = (V t+T -V t ) / V t

20092010 MarketWeightri β MarketWeightri β US0.35480.0730.89US0.35480.0750.91 * UK0.14770.0841.1UK0.14770.0841.13 France0.08990.0941.2France0.08990.0921.24 Switzerland0.06720.1080.93Switzerland0.06720.1080.94 Germany0.05770.0951.12Germany0.05770.0951.16 Netherlands0.04410.0951.07Netherlands0.04410.0941.10 South Korea0.03720.1271.32South Korea0.03720.1331.35 * Sweden0.06720.1301.14Sweden0.06720.1351.17 * Italy0.02770.0651.06Italy0.02770.0601.11 Singapore0.01970.1331.17Singapore0.01970.1341.18 * Japan0.01820.1020.99Japan0.01820.1030.99 * Spain0.01620.0731.2Spain0.01620.0661.06 Hong Kong0.00860.1701.18Hong Kong0.00860.1711.19 * Ireland0.0080.0131.09Ireland0.0080.0051.15 Brazil0.00590.3111.49Brazil0.00590.3011.52 World 0.080611.00World 0.08151.02

MarketWeightriri βri*β* RVOL US,2010 US0.35480.0750.910.02660.32220.0812 UK0.14770.0841.130.01240.1662 France0.08990.0921.240.00820.1112 Switzerland0.06720.1080.940.00720.0632 Germany0.05770.0951.160.00550.0667 Netherlands0.04410.0941.100.00410.0486 South Korea0.03720.1331.350.00490.0501 Sweden0.06720.1351.170.00900.0788 Italy0.02770.0601.110.00170.0307 Singapore0.01970.1341.180.00260.0232 Japan0.01820.1030.990.00190.0180 Spain0.01620.0661.060.00110.0171 Hong Kong0.00860.1711.190.00150.0102 Ireland0.0080.0051.150.00000.0092 Brazil0.00590.3011.520.00180.0090 Templeton0.9701 0.08871.02440.0853 World 0.08151.020.0788  Summary measures for Optimal Portfolio  r temp : 8.87%  β temp : 1.0244  RVOL temp :.0853

MarketWeight%riri βri*β* RVOL op,201 0 Brazil 0.171190.3011.520.05152740.2605 Sweden 0.291960.1351.170.0392990.3422 Hong Kong 0.136720.1711.190.02337710.1623 Switzerland 0.267340.1080.940.02879520.2516 Singapore 0.083290.1341.180.01118360.0980 Japan 0.049500.1030.990.00508690.0490 1.000000.15931.16360.1357  Summary measures for Optimal Portfolio  r op : 15.93%  β op : 1.1636  RVOL op :.1357

MarketWeight%riri βri*β* RVOL ocp1,2010 US0.35000.0750.910.02630.3178 Brazil0.06500.3011.520.01960.0989 Sweden0.06500.1351.170.00870.0762 Hong Kong0.06500.1711.190.01110.0772 Switzerland0.06500.1080.940.00700.0612 Singapore0.06500.1341.180.00870.0765 Japan0.06500.1030.990.00670.0643 South Korea0.01080.1331.350.00140.0145 Netherlands0.06500.0941.100.00610.0717 Germany0.04620.0951.160.00440.0534 France0.04680.0921.240.00430.0579 UK0.03400.0841.130.00290.0383 Italy0.01580.0601.110.00090.0176 Spain0.03690.0661.060.00240.0390 Ireland0.00440.0051.150.00000.0051 1.00000.11061.06950.1022  Summary measures for Optimal Portfolio  r chu : 11.06%  β chu : 1.0695  RVOL chu :.1022

MarketWeight%riri βri*β* RVOL ocp2,2010 US0.4150.0750.910.03120.3768 Brazil0.0650.3011.520.01960.0989 Sweden0.0650.1351.170.00870.0762 Hong Kong0.0650.1711.190.01110.0772 Switzerland0.0650.1080.940.00700.0612 Singapore0.0650.1341.180.00870.0765 Japan0.0650.1030.990.00670.0643 South Korea0.0650.1331.350.00860.0876 Netherlands0.0650.0941.100.00610.0717 Germany0.0650.0951.160.00620.0751 1.00000.11391.06540.1057  Summary measures for Optimal Portfolio  r angga : 11.39%  β angga : 1.0654  RVOL angga :.1057

Portfoli orprp β RVOL p,2010 Temple Growth0.08871.0240.0853 OP0.15931.1640.1357 OCP Chu0.11061.0690.1022 OCP Angga0.11391.0650.1057 MSCI USA0.07510.9080.0812 MSCI World0.08151.0180.0788 RankrpBetaRVOL 1OP 2OCP AnggaOCP ChuOCP Angga 3OCP ChuOCP AnggaOCP Chu 4Templeton G 5MSCI World MSCI USA 6 MSCI World

Op performs the best. 20092010 Portfoliorprp β RVOL p,2009 Portfoliorprp β RVOL p,2010 Temple Growth0.08830.970.0896 Temple Growth0.08871.0240.0853 OP0.15951.140.1380OP0.15931.160.1357 OCP Chu0.10931.030.1045OCP Chu0.11061.0690.1022 OCP Angga0.11171.020.1078OCP Angga0.11391.0650.1057 MSCI USA0.07340.890.0808MSCI USA0.07510.910.0812 MSCI World0.08060.010.0054MSCI World0.08151.0180.0788 Rankrprp BetaRVOLRankrprp BetaRVOL 1OP 1 2OCP A 2 OCP COCP A 3OCP C 3 OCP AOCP C 4Templeton GWorldTempleton G4 5WorldTempleton GUSA5World USA 6 World6USA World

Erlangga Nugrahabharata Eileen Chu. Templeton Growth Fund facts:  Introduced in November 1954  Goal: LT capital appreciation in global equities  Average.

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Erlangga Nugrahabharata Eileen Chu. Templeton Growth Fund facts:  Introduced in November 1954  Goal: LT capital appreciation in global equities  Average.

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Presentation on theme: "Erlangga Nugrahabharata Eileen Chu. Templeton Growth Fund facts:  Introduced in November 1954  Goal: LT capital appreciation in global equities  Average."— Presentation transcript:

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