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    Synopsis of The Thesis On Portfolio Optimization Improved Risk Adjusted Return

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    Rohit Verma
    1) The thesis evaluates if sample portfolios have higher risk or lower expected return than what could be obtained through optimization. It also compares the returns of optimized portfolios to original portfolios. 2) The risk analysis software Aegis Portfolio Manager is used to optimize the portfolios. Optimizations can obtain higher expected returns and lower risk for all portfolios using the expected returns and risks in the thesis. 3) However, over a six-month period the optimized portfolios do not consistently outperform the original portfolios, suggesting the optimizations do not improve portfolio returns. This may be due to uncertainty in the expected returns used.

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    Synopsis of The Thesis On Portfolio Optimization Improved Risk Adjusted Return

    Uploaded by

    Rohit Verma
    29 views4 pages
    1) The thesis evaluates if sample portfolios have higher risk or lower expected return than what could be obtained through optimization. It also compares the returns of optimized portfolios to original portfolios. 2) The risk analysis software Aegis Portfolio Manager is used to optimize the portfolios. Optimizations can obtain higher expected returns and lower risk for all portfolios using the expected returns and risks in the thesis. 3) However, over a six-month period the optimized portfolios do not consistently outperform the original portfolios, suggesting the optimizations do not improve portfolio returns. This may be due to uncertainty in the expected returns used.

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    1) The thesis evaluates if sample portfolios have higher risk or lower expected return than what could be obtained through optimization. It also compares the returns of optimized portfolios to original portfolios. 2) The risk analysis software Aegis Portfolio Manager is used to optimize the portfolios. Optimizations can obtain higher expected returns and lower risk for all portfolios using the expected returns and risks in the thesis. 3) However, over a six-month period the optimized portfolios do not consistently outperform the original portfolios, suggesting the optimizations do not improve portfolio returns. This may be due to uncertainty in the expected returns used.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    29 views4 pages

    Synopsis of The Thesis On Portfolio Optimization Improved Risk Adjusted Return

    Uploaded by

    Rohit Verma
    1) The thesis evaluates if sample portfolios have higher risk or lower expected return than what could be obtained through optimization. It also compares the returns of optimized portfolios to original portfolios. 2) The risk analysis software Aegis Portfolio Manager is used to optimize the portfolios. Optimizations can obtain higher expected returns and lower risk for all portfolios using the expected returns and risks in the thesis. 3) However, over a six-month period the optimized portfolios do not consistently outperform the original portfolios, suggesting the optimizations do not improve portfolio returns. This may be due to uncertainty in the expected returns used.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    SYNOPSIS OF THE THESIS ON

    PORTFOLIO OPTIMIZATION
    IMPROVED RISK ADJUSTED
    RETURN

    SUBMITTED BY:
    ROHIT KUMAR VERMA
    MBA SEMESTER IV (2009-11)

    SUBMITTED TO:
    MR. MOHAMMAD MURTUJA
    FACULTY SUPERVISOR (IUJ)
    INTRODUCTION:
    In this thesis, portfolio optimization is used to evaluate if a specific sample of portfolios have

    a higher risk level or lower expected return, compared to what may be obtained through

    Optimization. It also compares the return of optimized portfolios with the return of the original

    Portfolios. The risk analysis software Aegis Portfolio Manager developed by Barra is used for

    the optimizations. With the expected return and risk level used in this thesis, all portfolios can

    obtain a higher expected return and a lower risk. Over a six-month period, the optimized

    portfolios do not consistently outperform the original portfolios and therefore it seems as

    though the optimization do not improve the return of the portfolios. This might be due to the

    Uncertainty of the expected returns used in this thesis.

    THERE ARE DIFFERENT ISSUES TO CONSIDER WHEN INVESTORS CONSTRUCT A STOCK PORTFOLIO . THROUGH

    MAGAZINES , FRIENDS AND FINANCIAL ADVISORS THEY OBSERVE INTERESTING COMPANIES TO INVEST IN AND

    ADD TO THEIR PORTFOLIOS . I NVESTMENT OPPORTUNITIES CAN BE EVALUATED IN DIFFERENT WAYS . A

    COMMON METHOD IS TO USE FUNDAMENTAL ANALYSIS TO EVALUATE IF A COMPANY IS CORRECTLY VALUED AT

    THE STOCK EXCHANGE . I F THE COMPANY IS UNDERVALUED ACCORDING TO THIS METHOD , THE INVESTOR WILL

    BUY SHARES AND ASSUME THAT THE MARKETS VIEW OF THE COMPANY WILL CHANGE SO THAT THE STOCK

    PRICE WILL INCREASE . WHEN THE STOCK PRICE HAS RISEN SO THAT THE COMPANY IS OVERVALUED OR IF THE

    STOCK PRICE DOES NOT DEVELOP AS PREDICTED , THE INVESTOR WILL SELL THE STOCK.

    ANOTHER POSSIBILITY IS TECHNICAL ANALYSIS WHERE THE INVESTORS USE DIFFERENT METHODS TO FIND

    INTERESTING STOCKS FOR THEIR PORTFOLIOS . ONE WAY IS TO FIND STOCKS WHERE THE STOCK PRICE FOLLOWS

    AN UPWARD TREND SINCE THEY BELIEVE THAT THIS TREND WILL CONTINUE . T HESE INVESTORS ALSO SEARCH

    FOR PATTERNS IN THE DEVELOPMENT OF THE STOCK PRICE. T HEY BELIEVE THAT THE MARKET WILL ACT IN THE

    SAME WAY IN SIMILAR SITUATIONS AND THEREFORE ASSUME THAT THE STOCK PRICE WILL DEVELOP AS THEY
    PREDICT . THEIR PRIMARY BELIEF IS THAT BY ANALYSING STOCK CHARTS , IT IS POSSIBLE TO CAPTURE THE

    PSYCHOLOGY OF THE MARKET .

    WHEN THE INVESTORS HAVE CONSTRUCTED A PORTFOLIO OF SEVERAL STOCKS ONE POSSIBILITY IS TO TRY TO

    IMPROVE THE PERFORMANCE OF THE PORTFOLIO WITH MEAN-VARIANCE OPTIMISATION . GIVEN THE

    EXPECTED MEAN , VARIANCE AND COVARIANCE OF THE STOCKS IN A PORTFOLIO , THE OPTIMISATION TRIES TO

    FIND THE OPTIMAL COMBINATIONS OF THE STOCKS . T HEREBY THE VARIANCE OF THE PORTFOLIO IS

    MINIMISED AND THE EXPECTED RETURN IS MAXIMISED ACCORDING TO THE INVESTOR ’ S PREFERENCES . T HIS

    METHOD IS NOT WIDELY USED , WHICH MIGHT BE DUE TO THE FACT THAT THE VARIANCE AND THE COVARIANCE

    MEASURES OF STOCKS AND PORTFOLIOS ARE NOT AS EXTENSIVELY AVAILABLE AS THEIR PRICE SERIES .
    measures of stocks and portfolios are not as extensively available as their
    price series.

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