Abstract
The management of portfolios demands recognition that there is a myriad of factors which affect the market value of an investment holding other than its intrinsic worth. One such factor is the market itself. Given that the value of stocks is affected by fluctuations in the market, the only insurance portfolio managers can possibly provide themselves with in declining markets (other than liquidation) is their faith in the long-run (was it Keynes who said ‘In the long-run we are all dead’?) and the conviction that their assumptions about a company and its prospects will hold up over that long-run. This is not a great deal of protection unless you believe you know what proportion of a declining market price is due to changing attitudes to stocks in general or to that stock in particular. The answer is frequently revealed too late.
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References
Clasing, H. Dow Jones Irwin Guide to Puts and Calls.
Gastineau, G. The Stock Options Manual.
Journal of Political Economy, May/June 1973.
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Malkiel, B. and Quandt, R. Strategy and Rational Decisions in the Securities Option Market.
Sharpe, W. Investments.
Special thanks to C.A. Williamson of Sheppards and Chase for the use of information London Traded Options.
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© 1983 Desmond Corner and David G. Mayes
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MacFarlane, A.J. (1983). The Role of Traded Options in Portfolio Management. In: Corner, D., Mayes, D.G. (eds) Modern Portfolio Theory and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-05843-3_6
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DOI: https://doi.org/10.1007/978-1-349-05843-3_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-05845-7
Online ISBN: 978-1-349-05843-3
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