A replication of the “The eight Commandments of Investing” from E. Heri (2000) with the aim of reevaluating the defined principles with updated data.
Hug Raphael, 2019
Bachelor Thesis, Institute for Finance, HSW FHNW
Betreuende Dozierende: Matthias Härri
Keywords: Investing, Stocks, Bonds, International, Finance, Statistics, Historical, Performance Analysis, Modern Portfolio Theory, Principles
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Prof. Dr. Erwin Heri published the book mentioned in the thesis' title in 2000. The economic environment has changed in the mean-time - especially in the aftermath of the global financial crisis from 2007 to 2009. It is of great interest if and how the "commandments" introduced roughly 20 years ago by Heri are still true and relevant today.
The works of Heri (2000 and 2005) have been read and summarized by the author. A brief overview is provided in the introduction and followed by the replication of Heri's work. The replication is implemented with the updated data originating from Thomson Reuters EIKON and immediately compared to the original findings of 2000. Questions regarding different results are asked and briefly discussed. The discussion suggests in what direction further research would have to be conducted. All historical analyses are performed with Microsoft Excel.
The client received a full replication of Heri's book "The eight Commandments of Investing" with updated data, linking it to related areas and discussing today's challenges as well as suggestions to further research.
The thesis concludes that the essence and relevancy of all eight commandments has not changed and different market developments have been identified. Among the most striking findings are that equities tend to be the least risky asset class – provided they are well-diversified and invested over more than one decade. Annualized compound returns of developed nations seem to have declined over the last 20 years. Nonetheless, the approach of buying and holding the market still seems to be the safest and most profitable for the average investor. Additionally, falling international correlations could be observed.
Stocks and bonds can be expected to continue matching their long-term average returns over the coming decades. Keeping a long-term exposure to well-diversified stock market portfolios is therefore most desirable.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Accounting, Banking, Controlling and Finance
Art der Arbeit
Institute for Finance, HSW FHNW, Basel
Autorinnen und Autoren
Sprache der Arbeit
Business Administration International Management (Bachelor)
Investing, Stocks, Bonds, International, Finance, Statistics, Historical, Performance Analysis, Modern Portfolio Theory, Principles