Portfolio Management and Risk Analysis

Building the Portfolio

Assignment 6 requires building a portfolio based on the data from Course Projects parts three and 4, and our discussion of building optimal portfolios. Again, if any of the return, risk, or correlation data from parts 3 or 4 are inaccurate then Assignment 5 will not be accurate. Please ensure all of your data for Parts 3 and 4 of the Course Project are completely accurate.

Due Date: Monday April 29, 2019

Point Value: 25 points

Required Software:

Software to use is from the following web sites:


Required Data:

  1. Annual  Capital Market Expectations data for:

(a) Your market. (Bloomberg Barclays U.S. Aggregate Bond Index)

  • Three other risk markets (see below).
  • Risk –free asset class.

In total, you should have two equity markets; one fixed income market; one alternative market; and a risk free market.

  • For each risky market, you need:
  • Expected returns.
  • Risk/standard deviations.
  • Pairwise return correlations.
  • Assume investor degree of risk aversion, “A,” = three.
  • Use ‘Maximize Portfolio Objective Function’
  • Set all “Initial Weights” equal at 25%.
  • Set Lower and Upper Bound Weights as follows:
  • Equity: 25% to 75% for sum of the three.
  • Fixed Income: 25% to 75%.
  • Alternative: 5% to 10%.
  • Risk Free: 0% to 10%.


  1. What are the asset classes in your portfolio?
  2. What are the weights of each asset class in the optimal portfolio?
  3. What is the portfolio’s expected return and risk?
  4. Re-estimate the portfolio with “A” = 8, and “A” = 1. Compare to your model portfolio above.
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