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Active Portfolio Management in the German Stock Market: A CAPM Approach
Jönköping University, Jönköping International Business School, JIBS, Economics, Finance and Statistics.
2012 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

An investor can generate higher returns on the German stock market if he is using an active portfolio management strategy rather than its passive counterpart. This is possible because the market is not efficient and the DAX, namely the market portfolio, can be outperformed in regard to the average annual return and its variance. Therefore, the CAPM does not hold for the German stock market. The investor has to use the 10 weeks old changes of the ifo business climate index to forecast the DAX movement in the upcoming month. Even though this forecasting method only gave the correct trading signal for 56% of the months between 1991 and 2011, it outperformed the Buy and Hold strategy by 324 basis points. The main reason for this is that the business index was able to warn the investor of months in which the DAX lost over 10% of its value. The superiority of the active strategy was still valid when transaction costs were taken into account and was even stronger when call money was the alternative investment to the DAX rather than cash.

Place, publisher, year, edition, pages
2012. , 39 p.
Keyword [en]
Active Portfolio Management, DAX, German Stock Market, Forecasting
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hj:diva-18324OAI: oai:DiVA.org:hj-18324DiVA: diva2:531485
Presentation
2012-05-30, 3053, Jonkoping, 15:00 (English)
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2012-06-27 Created: 2012-06-07 Last updated: 2012-06-27Bibliographically approved

Open Access in DiVA

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