Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015

Emi Malaj; Visar Malaj

doi:doi:10.11648/j.ijafrm.20160101.12

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Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015

Emi Malaj, Visar Malaj

Published in International Journal of Accounting, Finance and Risk Management (Volume 1, Issue 1)

Received: 31 August 2016 Accepted: 20 October 2016 Published: 8 November 2016

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Abstract

We invest in order to obtain excess returns on the investment. The excess return is calculated with respect to the risk free rate and implies taking on risk. It is necessary to quantify both return and risk on the portfolio level. Asset returns are correlated, and for this reason the correlation matrix is estimated to quantify precisely the correlation among the returns on portfolio assets. These coefficients will then enable us to describe the combined returns on the portfolio’s assets, and the risk of the portfolio. The basis of all quantitative portfolio management and theory today are given by the well-known Modern Portfolio Theory. We analyze in this paper ten American stocks from completely different industry sectors, part of the Standard & Poor’s 500 index. The period is from December 2010 to December 2015, monthly observations. Since the end of 1999, the S&P’s 500 stock index has lost an average of 3.3% a year on an inflation adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy. In nearly 200 years of recorded stock-market history, no calendar decade has seen such a bad performance as the 2000s. The computer programs used in this work are MATLAB and Microsoft Excel. For optimization problems we mainly use the Excel Solver.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 1, Issue 1)
DOI	10.11648/j.ijafrm.20160101.12
Page(s)	11-18
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Portfolio Allocation, Stock Prices, Standard and Poor’s 500

References

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[2]	Bodie, Zvi, Alex Kane, and Alan J. Marcus, 2005, Investments, 6th edition, McGraw-Hill/Irwin.
[3]	Campbell, John Y., A. W. Lo, and A. C. MacKinlay. The Econometrics of Financial Markets. Princeton University Press, Princeton, NJ, 1997.
[4]	Chavas, Jean-Paul, and M. T. Holt. ‘‘Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology’’ Review of Economics and Statistics.
[5]	DeGroot, Morris H. Optimal Statistical Decisions. McGraw-Hill, New York, 1970.
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[8]	Epstein, L., and S. Zin. ‘‘Substitution, Risk Aversion, and Temporal Behavior of Consumption and Asset Returns: An Empirical Investigation’’ Journal of Political Economy. 99(1991): 263–286.
[9]	Elton, E. J., Martin, J. G., Brown, S. J., Goetzmann, W. N. (2014), Modern Portfolio Theory and Investment Analysis. United States: Wiley.
[10]	Hirshleifer, Jack, and John G. Riley. The Analytics of Uncertainty and Information. Cambridge University Press, Cambridge, 1992.
[11]	Hull, John. Options, Futures and Other Derivatives. Fifth Edition. Prentice Hall, 2002.
[12]	J. F. Affleck-Graves and A. H. Money 1976, A comparison of two portfolio selection models, The Investment Analysts Journal,7(4), 1976, 35-40.
[13]	Kahneman, Daniel, and A. Tversky. ‘‘Prospect Theory: An Analysis of Decision under Risk’’ Econometrica 47(1979): 263–191.
[14]	Low, R. K. Y.; Faff, R.; Aas, K. (2016). "Enhancing mean–variance portfolio selection by modeling distributional asymmetries". Journal of Economics and Business.
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[20]	Pelizzon L and G. Weber (2008) Optimal portfolio composition when real assets and liabilities are taken into account, Trends in Saving and Wealth n.1/2008, Pioneer Investments.
[21]	Pratt, John W. ‘‘Risk Aversion in the Small and in the Large’’ Econometrica 32(1964): 122–136.
[22]	Savage, Leonard J. The Foundations of Statistics. Wiley, New York, 1954.
[23]	Sharpe, William F. 1966. “Mutual Fund Performance.” Journal of Business. January, 39, pp. 119–38.
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APA Style

Emi Malaj, Visar Malaj. (2016). Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. International Journal of Accounting, Finance and Risk Management, 1(1), 11-18. https://doi.org/10.11648/j.ijafrm.20160101.12

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ACS Style

Emi Malaj; Visar Malaj. Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. Int. J. Account. Finance Risk Manag. 2016, 1(1), 11-18. doi: 10.11648/j.ijafrm.20160101.12

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AMA Style

Emi Malaj, Visar Malaj. Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. Int J Account Finance Risk Manag. 2016;1(1):11-18. doi: 10.11648/j.ijafrm.20160101.12

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@article{10.11648/j.ijafrm.20160101.12,
  author = {Emi Malaj and Visar Malaj},
  title = {Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {1},
  number = {1},
  pages = {11-18},
  doi = {10.11648/j.ijafrm.20160101.12},
  url = {https://doi.org/10.11648/j.ijafrm.20160101.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20160101.12},
  abstract = {We invest in order to obtain excess returns on the investment. The excess return is calculated with respect to the risk free rate and implies taking on risk. It is necessary to quantify both return and risk on the portfolio level. Asset returns are correlated, and for this reason the correlation matrix is estimated to quantify precisely the correlation among the returns on portfolio assets. These coefficients will then enable us to describe the combined returns on the portfolio’s assets, and the risk of the portfolio. The basis of all quantitative portfolio management and theory today are given by the well-known Modern Portfolio Theory. We analyze in this paper ten American stocks from completely different industry sectors, part of the Standard & Poor’s 500 index. The period is from December 2010 to December 2015, monthly observations. Since the end of 1999, the S&P’s 500 stock index has lost an average of 3.3% a year on an inflation adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy. In nearly 200 years of recorded stock-market history, no calendar decade has seen such a bad performance as the 2000s. The computer programs used in this work are MATLAB and Microsoft Excel. For optimization problems we mainly use the Excel Solver.},
 year = {2016}
}

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TY  - JOUR
T1  - Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015
AU  - Emi Malaj
AU  - Visar Malaj
Y1  - 2016/11/08
PY  - 2016
N1  - https://doi.org/10.11648/j.ijafrm.20160101.12
DO  - 10.11648/j.ijafrm.20160101.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 11
EP  - 18
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20160101.12
AB  - We invest in order to obtain excess returns on the investment. The excess return is calculated with respect to the risk free rate and implies taking on risk. It is necessary to quantify both return and risk on the portfolio level. Asset returns are correlated, and for this reason the correlation matrix is estimated to quantify precisely the correlation among the returns on portfolio assets. These coefficients will then enable us to describe the combined returns on the portfolio’s assets, and the risk of the portfolio. The basis of all quantitative portfolio management and theory today are given by the well-known Modern Portfolio Theory. We analyze in this paper ten American stocks from completely different industry sectors, part of the Standard & Poor’s 500 index. The period is from December 2010 to December 2015, monthly observations. Since the end of 1999, the S&P’s 500 stock index has lost an average of 3.3% a year on an inflation adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy. In nearly 200 years of recorded stock-market history, no calendar decade has seen such a bad performance as the 2000s. The computer programs used in this work are MATLAB and Microsoft Excel. For optimization problems we mainly use the Excel Solver.
VL  - 1
IS  - 1
ER  -

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Author Information

Emi Malaj

University of Vlora, Faculty of Economy, Department of Economics, Vlora, Albania
Visar Malaj

University of Tirana, Faculty of Economy, Department of Economics, Tirana, Albania

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Plain Text BibTeX RIS

APA Style

Emi Malaj, Visar Malaj. (2016). Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. International Journal of Accounting, Finance and Risk Management, 1(1), 11-18. https://doi.org/10.11648/j.ijafrm.20160101.12

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ACS Style

Emi Malaj; Visar Malaj. Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. Int. J. Account. Finance Risk Manag. 2016, 1(1), 11-18. doi: 10.11648/j.ijafrm.20160101.12

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AMA Style

Emi Malaj, Visar Malaj. Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015. Int J Account Finance Risk Manag. 2016;1(1):11-18. doi: 10.11648/j.ijafrm.20160101.12

Copy | Download

@article{10.11648/j.ijafrm.20160101.12,
  author = {Emi Malaj and Visar Malaj},
  title = {Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {1},
  number = {1},
  pages = {11-18},
  doi = {10.11648/j.ijafrm.20160101.12},
  url = {https://doi.org/10.11648/j.ijafrm.20160101.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20160101.12},
  abstract = {We invest in order to obtain excess returns on the investment. The excess return is calculated with respect to the risk free rate and implies taking on risk. It is necessary to quantify both return and risk on the portfolio level. Asset returns are correlated, and for this reason the correlation matrix is estimated to quantify precisely the correlation among the returns on portfolio assets. These coefficients will then enable us to describe the combined returns on the portfolio’s assets, and the risk of the portfolio. The basis of all quantitative portfolio management and theory today are given by the well-known Modern Portfolio Theory. We analyze in this paper ten American stocks from completely different industry sectors, part of the Standard & Poor’s 500 index. The period is from December 2010 to December 2015, monthly observations. Since the end of 1999, the S&P’s 500 stock index has lost an average of 3.3% a year on an inflation adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy. In nearly 200 years of recorded stock-market history, no calendar decade has seen such a bad performance as the 2000s. The computer programs used in this work are MATLAB and Microsoft Excel. For optimization problems we mainly use the Excel Solver.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015
AU  - Emi Malaj
AU  - Visar Malaj
Y1  - 2016/11/08
PY  - 2016
N1  - https://doi.org/10.11648/j.ijafrm.20160101.12
DO  - 10.11648/j.ijafrm.20160101.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 11
EP  - 18
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20160101.12
AB  - We invest in order to obtain excess returns on the investment. The excess return is calculated with respect to the risk free rate and implies taking on risk. It is necessary to quantify both return and risk on the portfolio level. Asset returns are correlated, and for this reason the correlation matrix is estimated to quantify precisely the correlation among the returns on portfolio assets. These coefficients will then enable us to describe the combined returns on the portfolio’s assets, and the risk of the portfolio. The basis of all quantitative portfolio management and theory today are given by the well-known Modern Portfolio Theory. We analyze in this paper ten American stocks from completely different industry sectors, part of the Standard & Poor’s 500 index. The period is from December 2010 to December 2015, monthly observations. Since the end of 1999, the S&P’s 500 stock index has lost an average of 3.3% a year on an inflation adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy. In nearly 200 years of recorded stock-market history, no calendar decade has seen such a bad performance as the 2000s. The computer programs used in this work are MATLAB and Microsoft Excel. For optimization problems we mainly use the Excel Solver.
VL  - 1
IS  - 1
ER  -

Copy | Download