Portfolio optimization
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Portfolio Optimization. I Discuss aspects of PO, including the Efficient Frontier, Capital Allocation Line, Modern Portfolio Theory and Portfolio Correlation. IIDiscuss how LTCM’s Portfolio Optimization went wrong, including the portfolio’s correlation factor.

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Portfolio optimization

Portfolio Optimization

IDiscuss aspects of PO, including the Efficient Frontier, Capital Allocation Line, Modern Portfolio Theory and Portfolio Correlation.

IIDiscuss how LTCM’s Portfolio Optimization went wrong, including the portfolio’s correlation factor.

IIIDiscuss Portfolio Optimization and some problems associated with it.

IVContrast a simpler alternative to more elaborate strategies while producing more consistent performance


Portfolio optimization

I a


Portfolio optimization

http://www.creativewealthstrategies.com/Modern_Portfolio_Theory.doc

I b


Portfolio optimization

I c


Portfolio optimization

The Efficient Frontier for S&P 100

http://www.nag.co.uk/doc/TechRep/Pdf/tr2_00.pdf

I d


Portfolio optimization

http://www.moneychimp.com/articles/valuation/capm.htm

I e


Portfolio optimization

http://en.wikipedia.org/wiki/File:Markowitz_frontier.jpg

Efficient Frontier.

I f


Portfolio optimization

Portfolio Optimization with two assets

Corporate Bond Treasury Risk-free

Optimal Portfolio

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II a


Portfolio optimization

Portfolio Optimization

Capital Allocation Line

The Efficient Frontier

Corporate Bond

Treasury Bond

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II b


Portfolio optimization

www.indexfundeducator.com

II c


Portfolio optimization

www.indexfundeducator.com

II d


Portfolio optimization

www.indexfundeducator.com

II e


Portfolio optimization

Risk and the Number of Securities

Risk (% pa)

Number of Securities

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II f


Portfolio optimization

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II g


Portfolio optimization

default-rate volatility

Moody’s Investor Services, Alexandra Berthault

II h


Portfolio optimization

III a

http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm


Portfolio optimization

IV a


Portfolio optimization

IV b


Passive investing produces better returns over time

Passive Investing Produces Better Returns Over Time

IV c


Portfolio optimization

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective. - Warren Buffett

http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

IV d


To summarize

To summarize:

Optimum portfolio is where

Efficient frontier meets the CAL

http://www.moneychimp.com/articles/valuation/capm.htm


Lessons learned from ltcm

Lessons learned from LTCM

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563


Mpt not realistic

MPT Not Realistic

http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm


Passive investing produces better returns over time1

Passive Investing Produces Better Returns Over Time


Thank you

Thank you


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