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Business and Finance

Davidson Accountant Case Study


Davidson accountant is a 30-year-old professional. He is the father of two, four and six-year-olds respectively. He received 22 points from the risk assessment test he received on the Rutgers website in 2016. Therefore, according to the results of the risk assessment test, Davidson’s risky person is risky. There may be a certain level of product risk. Davidson works with an investor from 25 to 35 years. ABC is located in the financial department at the first level as an executive candidate. At present, he has a higher level of debt compared to income, as he does mortgage loans and car loans, pays for children’s salaries, educational policy premiums and graduate contributions.

Davidson must match short-term investment, mortgage, car loan, household goods and current cash backup needs. The long-term goal of the investment is to save money and save many of his son’s school fees for his retirement years. Typical investment goals shown by the investor are in the accumulation phase. In addition, with the help of the portfolio manager, Davidson has demonstrated a policy statement, which clearly reflects investment goals and limits. According to Davidson’s political statement, the investment goals are capital accumulation, capital increase, capital protection and income generation. The restrictions in the policy statement are a budget limit of $ 49,1779.31 for investment. In addition, based on Davidson’s religious tuition, he does not prefer investments in tobacco, alcohol, and betting.


When you understand the current situation of Davidson, asset planning decisions will need to be made in the next step. This includes the distribution of Davidson’s wealth on various financial assets, which have stock shares to achieve this goal. In addition, Davidson’s risk profile will be an important factor in the decision of the types of shares that will be included in the portfolio. Davidson will be used from the top to select stocks that will be included in the perfect portfolio. Currently, the Davidson Apple portfolio, MasterCard, Starbucks, Disney, CVS Health and Nike. These reserves are in technology, finance, housing, entertainments, health and consumer goods, respectively.


Located in the health and light sector of CSV Health and Nike, respectively the robotic technology industry, it creates three additional equipment by changing the portfolio with shares in the sector and the retail banking industry. The reason for choosing a robotic technology sector, where growth prospects for your growth phase are reliable. This is particularly an indication of the increased demand for robot technology in Asia and the United States. The robotic technology of the production process, automation of household goods, used in military weapons and equipment. Davidson’s Vacuum Cleaners and General Electric’s portfolio include robotic technology shares. of shares

The retail sector has a growing demand, and the US economy has expanded the pace, it is expected that an increased number of middle-class and industry families will have increased. The retail sector will be included in the Davidson shares portfolio for Walmart and Best Buy shares. The expected bankruptcy sector, Trump, is expected to result in attractive anti-government market drunkenness. The return on investment in the banking sector is likely to increase, JP Morgan Chase and US Bancorp will be included in the portfolio.


A three-portfolio selection model will be put in place to select the most appropriate portfolio, which meets the requirements of Davidson’s investment policy. It will be essential to assess its applicability in terms of risk balance and to make a return on the use of four potential portfolios, the Markowitz analysis, the Sharpe analysis and the MIM analysis. Markowitz portfolio selection theory requires portfolio performance assessment in terms of profitability and risks, measured by change and standard deviation. Markowitz’s theory shows an interesting direction for risk diversification, assessing the conquest and correlation between stocks in a certain portfolio. MPT is based on the assumption that there are reasonable investors, with no transaction costs, that these markets are efficient, and that investors can get an unlimited amount of capital without risk. These assumptions are the basis of MPT restrictions, since investors are really unreasonable, unavailable because they have limited access to ineffective capital and markets.

Markowitz’s theory shortcomings, in 1963, Sharpe developed a model of the SIM to tackle MPT transactions. One of the important limits determined by it is to calculate the complexity of portfolio risk, portfolio returns and covariance as the number of securities in the portfolio will increase. He suggested one index model, which can be used to create the best portfolio. According to Sharpe, all security in portfolio performance can be compared to one index, which will be the basis for inclusion in the portfolio in terms of weight. In terms of risk and profit, individual efficiency-equity participation is compared to a certain level of the barrier, and only portfolio shares that exceed the standards in the portfolio are taken into account. The measures used in the SIM model include single security of Alpha, beta betting, and its variety.

The model uses diversity as the potential result of the market and the main input measures. SIM is based on the assumption that investors’ expectations are the same, that the investment horizon is consistent, the market index can be used as a security proxy, and the model error conditions are not met. The MIM portfolio selection theory is a new classic approach based on market arbitration opportunities. The MIM model uses a model as a different factor in choosing the optimum portfolio. Use budget restrictions of linear program modes, such as the simple method to choose the best portfolio. It uses the concept of optimization to choose the most appropriate portfolio from a set of securities, giving maximum profit. On the other hand, the concept of minimizing linear programs will be used to choose the optimum portfolio with the lowest risk in a certain portfolio.




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