scholarly journals Achieving cost-efficient diversification of water infrastructure system against uncertainty using modern portfolio theory

2018 ◽  
Vol 20 (3) ◽  
pp. 739-750 ◽  
Author(s):  
Sangmin Shin ◽  
Heekyung Park
Keyword(s):  
Water Resources ◽  
Real World ◽  
Portfolio Theory ◽  
Water Infrastructure ◽  
Expected Return ◽  
Modern Portfolio Theory ◽  
Infrastructure Systems ◽  
Infrastructure System ◽  
Current Water ◽  
Cost Efficient

Abstract Recent water-related disasters have shown that not all disrupted events are prevented with water infrastructure systems and current water systems are becoming more vulnerable to disruptions due to the high uncertainty of disrupted events. Many scholars in various fields suggest diversification in the system as a way to respond to the uncertainty. In the real world, however, it is difficult to maximize its use, especially with water infrastructure, due to high costs and incomplete assessment methods. Thus this study attempts to develop a method to quantify cost-effectiveness of diversification using a drought case study in Korea. Modern Portfolio Theory is used to find optimal combinations of water resources infrastructures in terms of diversification. First, expected return and risk of individual water resources for water supply are estimated. Then, expected return and risk of individual portfolios of the water resources are evaluated by varying their shares of 0 to 100%. Finally, non-inferior portfolios are identified and an optimal portfolio for an acceptable return or risk is selected as a solution. Consequently, a portfolio is selected as a desirable one to practically enhance diversification in water infrastructure systems against real world uncertainty in consideration of cost and budget.

Selecting Mutual Funds for Retirement Accounts (B)

2018 ◽  
pp. 1-16
Author(s):  
Phillip A. Braun
Keyword(s):  
Mutual Funds ◽  
Optimal Allocation ◽  
Portfolio Theory ◽  
Equity Fund ◽  
Expected Return ◽  
Modern Portfolio Theory ◽  
Related Case ◽  
Retirement Plan ◽  
Retirement Accounts ◽  
Northwestern University

Alice Monroe was an admissions officer at the Kellogg School of Management at Northwestern University. It was early January 2017 and Alice had enrolled in Northwestern's 403(b) retirement plan two months earlier. After spending a considerable amount of time examining the mutual funds available through the university's retirement plan, Alice had picked two to invest in: a large-cap equity growth fund and a mid-cap equity fund. (See the related case "Selecting Mutual Funds for Retirement Accounts (A).") Her initial allocations were 50% of her investment dollars in each fund. Upon further reflection, however, she realized these initial allocations were somewhat simplistic. She recalled, from an investments class she had taken at college, the topic of modern portfolio theory, which held that by adding more funds to her portfolio she might be able to achieve greater diversification and thereby reduce the overall risk of her portfolio and/or achieve a higher expected return. Alice now was considering adding an intermediate-term bond fund and a real estate fund to her retirement account. She hoped to use modern portfolio theory to prove that these new funds would indeed help her diversify her portfolio. If they did, she would also reassess her portfolio weights to determine the optimal allocation.

Application of modern financial portfolio theory to water resource portfolios

2006 ◽  
Vol 6 (5) ◽  
pp. 35-41 ◽  
Author(s):  
M. Beuhler
Keyword(s):  
Water Quality ◽  
Water Resources ◽  
Financial Markets ◽  
Water Resource ◽  
Additional Data ◽  
Portfolio Theory ◽  
Hydrologic Cycle ◽  
Modern Portfolio Theory ◽  
Systematic Risks ◽  
Surface And Groundwater

Modern portfolio theory developed for financial markets has application to water resource portfolios. It can help make decisions on how to optimally meet future water needs. By explicitly considering volatility and correlations among water resource alternatives, rational resource combinations can be selected. It enables water planners to decide how much to invest in traditional ways to meet water needs such as surface and groundwater supplies and to decide how much to invest in non-traditional, more expensive supplies such as recycling, conservation, and desalination. It enables explicit risk reduction of systematic risks due to the hydrologic cycle such as drought, and non-systematic risks such as water quality, climate, and energy. This paper describes a qualitative application of modern portfolio theory to water resources. Quantitative application will require the development of additional data.

Analysis of system innovation in urban water infrastructure systems: an agent-based modelling approach

2005 ◽  
Vol 5 (2) ◽  
pp. 135-144 ◽  
Author(s):  
C. Kotz ◽  
H. Hiessl
Keyword(s):  
Urban Areas ◽  
Developed Countries ◽  
Urban Water ◽  
Water Infrastructure ◽  
Agent Based ◽  
Infrastructure Systems ◽  
Infrastructure System ◽  
The Developed Countries ◽  
Industrialised Countries ◽  
Innovation Processes

The conventional urban water infrastructure concept, as it is implemented in industrialised countries as well as in urban areas in developing countries face increasing problems not only caused by investments required, but also by major problems with respect to retrofitting, upgrading and inflexibility with respect to future developments. Identifying alternative approaches to provide urban water services and finding ways to make a transition from the technological trajectory of the conventional urban water infrastructure system to more sustainable ones is of interest for both the developing and the developed countries. The paper describes essential aspects associated with innovation processes in urban water infrastructure systems and presents an agent-based model to simulate these innovation processes. Additionally, first simulation results are presented.

scholarly journals Robust Statistical Portfolio Investment in Modern Portfolio Theory: A Case Study of Two Stocks Combination in Kuala Lumpur Stock Exchange

2019 ◽  
Vol 8 (5C) ◽  
pp. 214-221
Keyword(s):  
Lower Risk ◽  
Stock Exchange ◽  
Pearson Correlation ◽  
Efficient Frontier ◽  
Portfolio Theory ◽  
Share Price ◽  
Portfolio Investment ◽  
Kuala Lumpur ◽  
Expected Return ◽  
Modern Portfolio Theory

Modern portfolio theory is a theory of diversification in portfolio selection to achieve lower risk for a target expected return. Therefore, the objective of this study is to reducing investment risk by developing diversification of portfolio investment using combination of two share prices that exhibits negative or low positive correlation. Data selected in this study are the rate of return for two companies that listed in Kuala Lumpur Stock Exchange (KLSE). The selected companies are Ajinomoto Malaysia Berhad and UMW Holdings Berhad. The methodologies involved in this project are expected return calculation, statistical normality checking, correlation diagnostics and expected variance evaluation for investment portfolio. The Pearson correlation analysis shows correlation value is -0.879. This finding concludes there is significant and strong negative correlation between share price return of UMW Holdings Berhad and Ajinomoto Malaysia Berhad. Result indicates the efficient frontier for investment is started with 42.5% investment in Ajinomoto and 57.5% investment in UMW. The expected portfolio return using this investment combination is 0.14 percentages. Meanwhile, the highest expected return on efficient frontier is 19.17 percentages. The investment combination for maximum return is 100% in Ajinomoto share price. The implication of this study is it will help investors to develop better decision about their portfolio investment with lower risk for a target of expected return.

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