Abstract
Rationalists may argue that the best way to manage an investment portfolio is to use risk-balancing strategies such as asset class diversification. Positivists would likely insist on probabilistic concepts – perhaps a mean-variance statistical technique. A third less-studied approach in the financial literature is to apply a behaviorist philosophy such as heuristics or rating the quality of the management team. An interesting variation is to study the behavior of effective asset managers, particularly their methodologies, and then imitate those best-practices. This is a fundamental principle underlying case studies, ethnography, grounded theory and other interpretative research philosophies, so it was useful to apply it to study the investment discipline. Furthermore, extant financial studies predated, or tested data before, the global financial crisis, which may invalidate older models. Therefore, the researcher interviewed 39 non-banking asset managers from high-performing NYSE-listed companies to explore their perception that current portfolio management techniques would be effective in volatile financial markets. A statistically significant asymmetric plot was produced, which revealed gender and market outlook were key factors.
Similar content being viewed by others
References
Albert, N.L., Merunka, D. and Valette-Florence, P. (2008) When consumers love their brands: Exploring the concept and its dimensions. Journal of Business Research 61 (10): 1062–1075.
Alghalith, M. (2012) New methods of estimating volatility and returns. Journal of Asset Management 13 (1): 1–4.
Bhargava, V., Dania, A. and Malhotra, D.K. (2012) Industry effects and volatility transmission in portfolio diversification. Journal of Asset Management 13 (1): 22–33.
Blasius, J., Greenacre, M., Groenen, P.J.F. and Van De Velden, M. (2009) Special issue on correspondence analysis and related methods. Computational Statistics & Data Analysis 53 (8): 3103–3106.
Brijlal, P. and Quesada, L. (2004) The use of capital budgeting techniques in businesses: A perspective from the Western Cape. Journal of Applied Business Research 25 (4): 37–46.
Bryde, D.J. (2003) Project management concepts, methods and application. International Journal of Operations & Production Management 23 (7/8): 775–793.
Cochran, J.J., Cox, L.A., Keskinocak, P., Kharoufeh, J.P. and Smith, J.C. (eds.) (2011) Wiley Encyclopedia of Operations Research and Management Science, Vol. 8. Hoboken, NJ: Wiley.
Cohen, J., Cohen, P., West, S.G. and Aiken, L.S. (2003) Applied Multiple Regression/Correlation Analysis for the Behavioral Sciences. Mahwah, NJ: Lawrence Erlbaum Associates.
Cooper, R.G. and Edgett, S.J. (2008) Maximizing productivity in product development. Research Technology Management 51 (2): 47–59.
Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (2001) Portfolio Management for New Products. Cambridge, MA: Perseus Books Group.
Creswell, J.W. (2009) Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. New York: Sage.
Cura, T. (2009) Particle swarm optimization approach to portfolio optimization. Nonlinear Analysis: Real World Applications 10 (4): 2396–2406.
Diana, M. and Pronello, C. (2010) Traveler segmentation strategy with nominal variables through correspondence analysis. Transport Policy 17 (3): 183–190.
Dichev, I.D. and Tang, V.W. (2009) Earnings volatility and earnings predictability. Journal of Accounting and Economics 47 (1–2): 160–181.
Eakins, S.G. and Stansell, S. (2007) An examination of alternative portfolio rebalancing strategies applied to sector funds. Journal of Asset Management 8 (1): 1–8.
Edmans, A. (2011) Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics 101 (3): 621–640.
Estrada, J., Kritzman, M. and Myrgren, S. (2005) Countries versus industries in Europe: A normative portfolio approach. Journal of Asset Management 6 (2): 85–103.
Fama, E.F. and French, K.R. (1995) Size and book-to-market factors in earnings and returns. Journal of Finance 50 (1): 131–155.
Fang, Y., Lai, K.K. and Wang, S. (2008) Fuzzy portfolio optimization: Theory and methods. In: W. Trockel (ed.) Lecture Notes in Economics and Mathematical Systems. Berlin, Germany: Springer.
Ghosh, D. (2010) Asset acquisition, diversification, and revision-theoretic exercises in portfolio theory. Quarterly Journal of Finance and Accounting 49 (1): 19–38.
Gill, J., Johnson, P. and Clark, M. (2010) Research Methods for Managers. London: Sage.
Greenacre, M. and Blasius, J. (eds.) (2006) Multiple Correspondence Analysis and Related Methods. Boca Raton, FL: Taylog & Francis.
Guastaroba, G., Mansini, R. and Speranza, M.G. (2009) On the effectiveness of scenario generation techniques in single period portfolio optimization. European Journal of Operational Research 192 (2): 500–511.
Gupta, P., Inuiguchi, M. and Mehlawat, M.K. (2011) A hybrid approach for constructing suitable and optimal portfolios. Expert Systems with Applications 38 (5): 5620–5632.
Hagigi, M. and Sivakumar, K. (2009) Managing diverse risks: An integrative framework. Journal of International Management 15 (3): 286–295.
Hair, J.F., Black, W.C., Babin, B.J., Anderson, R.E. and Tatham, R.L. (2006) Multivariate Data Analysis. Upper Saddle River, NJ: Prentice-Hall.
Harter, C.I. and Harikumar, T. (2004) Management compensation and project life. Journal of Applied Business Research 20 (4): 64–71.
Heybati, F., Roodposhti, F.R. and Moosavi, S.R. (2011) Behavioral approach to portfolio selection: The case of Tehran Stock Exchange as emerging market. African Journal of Business Management 5 (17): 7593–7602.
Huemann, M., Keegan, A. and Turner, J.R. (2006) Human resource management in the project-oriented company: A review. International Journal of Project Management 25 (3): 315–323.
Hunt, E.B. (2007) The Mathematics of Behavior. New York: Cambridge University Press.
Kahneman, D. and Amos, T. (1979) Prospect theory, an analysis of decision under risk. Econometric 47 (2): 13–24.
Kostadinov, K. (2005) Tail approximation for credit risk portfolios with heavy-tailed risk factors. Journal of Risk 8 (2): 81–107.
Kritzman, M., Lowry, K. and Royen, A.-S.V. (2002) Cross-country and intertemporal indexes of risk aversion. Journal of Asset Management 3 (1): 29–38.
Kumar, S.S.S. (2012) The relevance of emerging markets in portfolio diversification: Analysis in a downside risk framework. Journal of Asset Management 13 (3): 162–169.
Loomes, G. and Sugden, R. (1982) Regret theory: An alternative theory of rational choice under uncertainty. Economics Journal 92 (368): 1–18.
Mangan, J., Lalwani, C. and Gardner, B. (2004) Combining quantitative and qualitative methodologies in logistics research. International Journal of Physical Distribution & Logistics Management 34 (7): 565–578.
Markowitz, H. (1952) Portfolio selection. Journal of Finance 7 (1): 77–91.
Mills, T.C. and Patterson, K. (eds.) (2009) Handbook of Econometrics, Volume 2: Applied Econometrics. New York: Palgrave Macmillan.
Morse, A. and Shive, S. (2011) Patriotism in your portfolio. Journal of Financial Markets 14 (2): 411–440.
Ongena, S., Tümer-Alkan, G. and Vermeer, B. (2011) Corporate choice of banks: Decision factors, decision maker, and decision process. Journal of Corporate Finance 17 (2): 326–351.
Orr, R.J. and Scott, W.R. (2008) Institutional exceptions on global projects: A process model. Journal of International Business Studies 39 (4): 562–588.
Oshio, T. and Kobayashi, M. (2009) Income inequality, area-level poverty, perceived aversion to inequality, and self-rated health in Japan. Social Science & Medicine 69 (3): 317–326.
Patriksson, M. (2008) A survey on the continuous nonlinear resource allocation problem. European Journal of Operational Research 185 (1): 1–46.
Saaty, T.L. (1994) Highlights and critical points in the theory and application of the analytic hierarchy process. European Journal of Operational Research 74 (3): 426–447.
Schermerhorn, J.R., Hunt, J.G., Osborn, R.N. and Uhl-Bien, M. (2012) Organizational Behavior. New York: John Wiley & Sons, Inc.
Shefrin, H. and Statman, M. (1985) The disposition effect to sell winners too early and ride losers too long. Journal of Finance 40 (3): 18–27.
Snipas, M. and Valakevicius, E. (2010) Markov model of multi-class, multi-server queuing system with priorities. Journal of Communication and Computer 7 (1): 62.
Sourial, N. et al (2010) Correspondence analysis is a useful tool to uncover the relationships among categorical variables. Journal of Clinical Epidemiology 63 (6): 638–646.
Sperandio, S. and Girard, P. (2010) Decision-making framework methodology: Risk assessment in strategic management. International Journal of Management and Decision Making 11 (1): 4–18.
Steuer, R.E., Qi, Y. and Hirschberger, M. (2005) Portfolio optimization: New capabilities and future methods. Journal of Business [Zeitschrift für Betriebswirtschaft] 76 (2): 199–220.
Stracca, L. (2006) Delegated portfolio management: A survey of the theoretical literature. Journal of Economic Surveys 20 (5): 823–848.
Strang, K.D. (2009) Using recursive regression to explore nonlinear relationships and interactions: A tutorial applied to a multicultural education study. Practical Assessment, Research & Evaluation 14 (3): 1–13.
Strang, K.D. (2010) Radiology manufacturing projects and politics: Scientist and politician normalized risk decision processes. International Journal of Management and Decision Making 11 (3/4): 231–248.
Strang, K.D. (2011a) Asynchronous knowledge sharing and conversation interaction impact on grade in an online business course. Journal of Education for Business 86 (4): 223–233.
Strang, K.D. (2011b) Constructivism in synchronous and asynchronous virtual learning environments for a research methods course. International Journal of Virtual and Personal Learning Environments 2 (3): 50–63.
Strang, K.D. (2011c) A grounded theory study of cellular phone new product development. International Journal of Internet and Enterprise Management 7 (4): 366–387.
Tokic, D. (2012) The passive investor puzzle. Journal of Asset Management 13 (2): 141–154.
Tracy, S.J. (2010) Qualitative quality: Eight big-tent criteria for excellent qualitative research. Qualitative Inquiry 16 (10): 837–851.
Travers, F.J. (2004) Investment Manager Analysis: A Comprehensive Guide to Portfolio Selection, Monitoring and Optimization. Hoboken, NJ: Wiley.
Vanasselt, M.B.A. and Renn, O. (2011) Risk governance. Risk Research Journal 14 (4): 431–449.
Verbeeten, F.H.M. (2006) Do organisations adopt sophisticated capital budgeting practices to deal with uncertainty in the investment decision? Management Accounting Research 17 (1): 106–120.
Wang, J., Xu, Y. and Li, Z. (2009) Research on project selection system of pre-evaluation of engineering design project bidding. International Journal of Project Management 27 (6): 584–599.
Williams, L.J., Abdi, H., French, R. and Orange, J.B. (2010) A tutorial on multi-block discriminant correspondence analysis (mudica): A new method for analyzing discourse data from clinical populations. Journal of Speech Language and Hearing Research 53 (1): 1–21.
Wong, B.K. and Lai, V.S. (2011) A survey of the application of fuzzy set theory in production and operations management: 1998–2009. International Journal of Production Economics 129 (1): 157–168.
Yunker, J.A. and Melkumian, A.A. (2010) The effect of capital wealth on optimal diversification: Evidence from the survey of consumer finances. The Quarterly Review of Economics and Finance 50 (1): 90–98.
Zhou, A., Qu, B.-Y., Li, H., Zhao, S.-Z., Suganthan, P.N. and Zhang, Q. (2011) Multiobjective evolutionary algorithms: A survey of the state of the art. Swarm and Evolutionary Computation 1 (1): 32–49.
Acknowledgements
I would like to thank the University of Phoenix (USA) for their faculty assistance.
Author information
Authors and Affiliations
Additional information
1has a Doctorate in Project Management (business research), an MBA (honors), a BS (honors), as well as a Business Technology diploma (honors). He is a certified Project Management Professional® from Project Management Institute, and is a Fellow of the Life Management Institute (distinction, actuary statistics and pension systems), from Life Office Management Association. Dr Strang teaches multidisciplinary subjects in business and he supervises doctorate students. His research interests are also multidisciplinary across management science, culture and education. He is Chief Editor and Associate Editor of several journals.
Rights and permissions
About this article
Cite this article
Strang, K. Man versus math: Behaviorist exploration of post-crisis non-banking asset management. J Asset Manag 13, 348–367 (2012). https://doi.org/10.1057/jam.2012.14
Received:
Revised:
Published:
Issue Date:
DOI: https://doi.org/10.1057/jam.2012.14