It finally shows you all mean-variance efficient portfolios that you can choose from, based on your risk aversion. For every possible risk, it gives the highest return and best asset allocation.
Note:
Note:
- The list is pre-canned 100 stocks of S&P 100 list. The returns shown were historic 10 yr monthly returns (Jan1998 to Dec2008).
- The optimization for mean variance frontier subject to constraints had been performed using Lagrange Multipiers and differential calculus.
- Discovering the market portfolio of chosen risk-assets was done using linear algebra involving matrix calc.
The next phase of it will include more complex and sophisticated extensions like black-litterman and Treynor-Black models.
Great tool and effort.
ReplyDeleteWould you be able to broaden the assets to include international mkts (ex: MSCI EAFE constituents)?
Looking for similar tool for my usage. is this open source?
ReplyDeletegood work! overlay this with portfolio level hedging and dynamic rebalancing along with more asset classes (REIT, GSCI)...you got here a commercial grade portfolio tool
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