Hierarchical Portfolio Management: Theory and Applications

Under his own preference, how should an investor coordinate the asset managers such that his aggregated portfolio is optimized? The efficiency of each managed sub portfolio and the aggregation of all the sub portfolios are the 2 main underlying problems considered in this dissertation. Contrary to popular believes, the tracking error volatility (TEV) optimization, commonly used to find the optimal active portfolio, often yields inferior portfolio choices. The results in this dissertation together with those in Jagannathan and Ma (2003) underscore how effective simple portfolio optimization techniques can be. In aggregating all the sub portfolios, the investor’s choice is limited if the managers only report the local optimal portfolio. Since the reported portfolios are the result of a stand-alone optimization within the sub portfolio while disregarding all the rest, each reported portfolio can only be optimal locally. A rational investor should and must demand for more choices than the locally optimal choice alone. Using simple examples in the single and multi period setting, this dissertation illustrates how significant the improvement in aggregated portfolio performance can be, both in terms of expectation as well as realization. Given the insufficiency of the TEV optimization, the inherent question is whether the active performance measures like the information ratio still suffice in judging a manager’s performance. As it turns out, the investor should be very careful when applying the active performance measures. Preferably, the Sharpe ratio should be used to judge the added value of a manager to the aggregated portfolio

The effects of decision flexibility in the hierarchical investment decision process

Large institutional investors allocate their funds over a number of classes (e.g. equity, fixed income and real estate), various geographical regions and different industries. In practice, these allocation decisions are usually made in a hierarchical (top-down), consecutive way. At the higher decision level, the allocation is made on basis of benchmark portfolios (indexes). Such indexes are then set as targets for the lower levels. For example, at the top level the allocation decision is made on the basis of asset class benchmark indexes, on the second level the decisions are made on the basis of sector benchmark indexes, etc. Obviously, the lower levels have considerable flexibility to deviate from these targets. That is the reason why targets often come with limits on the maximally allowed deviation (or "tracking error") from these targets. The potential consequences of deviations from the benchmark portfolios have received very little attention in the literature. In this paper, we discuss and illustrate this influence. The lower level tracking errors with respect to the benchmark indexes propagate to the top level. As a result the risk-return characteristics of the actual aggregate portfolio will be different from those of the initial benchmark-based portfolio. We illustrate this effect for a two level process to allocate funds over individual US stocks and sectors. We show that the benchmark allocation approaches used in practice yield inferior solutions when compared to a non-hierarchical approach where full information about individual lower level investment opportunities is available. Our results reveal that even small deviations from the benchmark portfolios can cause large shifts in the top-level risk-return space. This implies that the incorporation of lower level information in the initial top-level decision process will lead to a different (possibly better) allocation

A Framework for Managing a Portfolio of Socially Responsible Investments

In this paper we present and illustrate using real-life data a framework for managing an investment portfolio in which the investment opportunities are described in terms of a set of attributes and part of this set is intended to capture the effects on society. Here we link with the emerging literature on SRI: Socially Responsible Investment. Given the multifarious descriptions of the individual investment opportunities we show how these can be combined into portfolios with the same attributes at the portfolio level. Also we show how a manager can systematically be supported in the choice between different portfolio profiles. As part of the framework we use multi-criteria decision tools

Perceived Stress After Acute Myocardial Infarction: A Comparison Between Young and Middle-Aged Women Versus Men

Objective: The aim of the study was to examine how psychological stress changes over time in young and middle-aged patients after experiencing an acute myocardial infarction (AMI) and whether these changes differ between men and women. Methods: We analyzed data obtained from 2358 women and 1151 men aged 18 to 55 years hospitalized for AMI. Psychological stress was measured using the 14-item Perceived Stress Scale (PSS-14) at initial hospitalization and at 1 month and 12 months after AMI. We used linear mixed-effects models to examine changes in PSS-14 scores over time and sex differences in these changes, while adjusting for patient characteristics and accounting for correlation among repeated observations within patients. Results: Overall, patients' perceived stress decreased over time, especially during the first month after AMI. Women had higher levels of perceived stress than men throughout the 12-month period (difference in PSS-14 score = 3.63, 95% confidence interval = 3.08 to 4.18, p < .001), but they did not differ in how stress changed over time. Adjustment for patient characteristics did not alter the overall pattern of sex difference in changes of perceived stress over time other than attenuating the magnitude of sex difference in PSS-14 score (difference between women and men = 1.74, 95% confidence interval = 1.32 to 2.16, p < .001). The magnitude of sex differences in perceived stress was similar in patients with versus without post-AMI angina, even though patients with angina experienced less improvement in PSS-14 score than those without angina. Conclusions: In young and middle-aged patients with AMI, women reported higher levels of perceived stress than men throughout the first 12 months of recovery. However, women and men had a similar pattern in how perceived stress changed over time

Suppression of MAPK11 or HIPK3 reduces mutant Huntingtin levels in Huntington's disease models.

Most neurodegenerative disorders are associated with accumulation of disease-relevant proteins. Among them, Huntington disease (HD) is of particular interest because of its monogenetic nature. HD is mainly caused by cytotoxicity of the defective protein encoded by the mutant Huntingtin gene (HTT). Thus, lowering mutant HTT protein (mHTT) levels would be a promising treatment strategy for HD. Here we report two kinases HIPK3 and MAPK11 as positive modulators of mHTT levels both in cells and in vivo. Both kinases regulate mHTT via their kinase activities, suggesting that inhibiting these kinases may have therapeutic values. Interestingly, their effects on HTT levels are mHTT-dependent, providing a feedback mechanism in which mHTT enhances its own level thus contributing to mHTT accumulation and disease progression. Importantly, knockout of MAPK11 significantly rescues disease-relevant behavioral phenotypes in a knockin HD mouse model. Collectively, our data reveal new therapeutic entry points for HD and target-discovery approaches for similar diseases