Modelling the South African equity investment by using portfolio opportunity distributions

Susana Nyman

Abstract


Recent studies indicate that indices and peer group comparison are the most commonly used proxies to measure a portfolio manager's relative performance. However, methods based on both of these proxies have several drawbacks that may lead to incorrect conclusions regarding a manager's skill in managing investment portfolios. This study addresses the shortcomings of the traditional approaches, and applies an alternative method to eliminate their shortcomings. The method is applied to all South African equity unit trust portfolios classified as either value or growth portfolios. Although data constraints ruled out any statistical testing of this hypothesis, the study were evaluated in PODs approach, which may indeed offer a more accurate performance measurement approach.

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