PRELIMINERY CONSIDERATIONS

INTRODUCTION

This project aims to construct an active international equity portfolio based on trade date Feb 28 2002. We perform the key stages in the investment management process including investment analysis, formulating risk-return expectations, ¡®blending in¡¯ investment heuristics, portfolio optimisation and performance evaluation (both in and out of sample).

PRELIMINERY CONSIDERATIONS

Choice of Indices
We select the FTSE All-World index (FTAW) and 48 constituent country indices for three reasons:

First, the FTAW index is a well-known and widely used benchmark index, so it can be readily accepted as a valid data origin.

Second, The FTAW covers a broad range of stock markets [both in terms of geographical area and the risk-return spectrum], including developed markets, advanced emerging markets and emerging markets. Further there are standardized indices for each of the 48 constituent countries.

Third, and related, we can obtain (from DATASTREAM) dollar ...