Statistics Project, Finance and Accounting
Mean-Variance Optimization
Project description
Project: Mean-Variance Optimization
Explain an asset allocation recommendation in understandable (to a well-educated non-finance person) but using appropriate technical terms.
Specific Tasks:
1. Open Excel file “Portfolio VaR Updated”.
2. Open the Word Document “Excel VaR Videos”.
3. Prepare the Excel spreadsheet as instructed in the videos, making sure to use your own set of constraints, different from those provided in the example file.
4. Prepare an asset allocation recommendation paper for a fictitious client, including the following sections (including graphics as appropriate):
a. Definition of your client (risk profile and risk tolerance, current portfolio, goals (for example, saving for retirement).
b. Assumptions (asset class assumptions (you can reference Professor’s assumptions), theory of finance using (efficient frontier, mean, standard deviation), others) and constraints (be sure to include your rationale for your constraints)
c. Summary of your analysis
i. Mean-variance analysis
ii. Historical VaR Anlaysis
iii. Portfolios you considered (same risk, higher return; same return, lower risk; move up or down the frontier)
d. Final recommendation along with rationale
e. Style analysis of a mutual fund and recommendation as to if that fund is a good fit to execute your asset allocation recommendation.
i. Assume your client comes to you with a balanced portfolio mutual fund (contains both stocks and bonds (usually will have “balanced” or “asset allocation” in title)). You will run the style analysis to determine if that mutual fund would be a good fit for your recommendation. You do not need to find a mutual fund that has a high R-squared to your recommended allocation.
1. Open Excel file “Portfolio VaR Updated”.
2. Open the Word Document “Excel VaR Videos”.
3. Prepare the Excel spreadsheet as instructed in the videos, making sure to use your own set of constraints, different from those provided in the example file.
4. Prepare an asset allocation recommendation paper for a fictitious client, including the following sections (including graphics as appropriate):
a. Definition of your client (risk profile and risk tolerance, current portfolio, goals (for example, saving for retirement).
b. Assumptions (asset class assumptions (you can reference Professor’s assumptions), theory of finance using (efficient frontier, mean, standard deviation), others) and constraints (be sure to include your rationale for your constraints)
c. Summary of your analysis
i. Mean-variance analysis
ii. Historical VaR Anlaysis
iii. Portfolios you considered (same risk, higher return; same return, lower risk; move up or down the frontier)
d. Final recommendation along with rationale
e. Style analysis of a mutual fund and recommendation as to if that fund is a good fit to execute your asset allocation recommendation.
i. Assume your client comes to you with a balanced portfolio mutual fund (contains both stocks and bonds (usually will have “balanced” or “asset allocation” in title)). You will run the style analysis to determine if that mutual fund would be a good fit for your recommendation. You do not need to find a mutual fund that has a high R-squared to your recommended allocation.
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