Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015
International Journal of Accounting, Finance and Risk Management
Volume 1, Issue 1, November 2016, Pages: 11-18
Received: Aug. 31, 2016; Accepted: Oct. 20, 2016; Published: Nov. 8, 2016
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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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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.
Portfolio Allocation, Stock Prices, Standard and Poor’s 500
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Emi Malaj, Visar Malaj, Portfolio Allocation: An Empirical Analysis of Ten American Stocks for the Period 2010-2015, International Journal of Accounting, Finance and Risk Management. Vol. 1, No. 1, 2016, pp. 11-18. doi: 10.11648/j.ijafrm.20160101.12
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