Optimizing Investment Portfolio Allocation
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Authors
Boone, Nathan
Advisor
Ted Wendt
Eric Sullivan
Peter Larsen
Eric Sullivan
Peter Larsen
Editor
Date of Issue
2019-04-01
Subject Keywords
linear program, portfolio allocation, Monte Carlo simulation
Publisher
Citation
Series/Report No.
item.page.identifier
Title
Optimizing Investment Portfolio Allocation
Other Titles
Type
thesis
Description
Abstract
This analysis presents a model that could be used to inform a portfolio manager in which sectors of the stock market to invest in for the equity portion of an investment portfolio. The model incorporates a linear program to suggest the optimal combination of sectors to invest in with respect to various constraints. We use a linear projection model to estimate the upcoming month’s return of each sector, with monthly changes in economic indicators as inputs. The time frame for the historical returns data that we use to build the model runs from 8=1=2008 - 9=1=2018. Additionally, we apply a Monte Carlo simulation to the projected returns over one hundred thousand iterations. The model suggests which combination of sectors may offer the highest return on investment with consideration to the potential volatility of each sector.
Sponsors
Degree Awarded
Bachelor's
Semester
Spring
Department
Mathematics, Engineering & Computer Science