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1. The document discusses portfolio optimization by selecting stocks from various sectors to maximize return while minimizing risk. 2. It aims to compare the average return of portfolios designed using modern portfolio theory, Monte Carlo simulation, and an index fund. 3. The portfolio will include stocks from sectors like FMCG, automobile, pharma, IT, and manufacturing, with the objective of optimizing the portfolio to maximize return subject to constraints on minimum and maximum weights for each stock.

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luong.hng43
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14 views

Group Project

1. The document discusses portfolio optimization by selecting stocks from various sectors to maximize return while minimizing risk. 2. It aims to compare the average return of portfolios designed using modern portfolio theory, Monte Carlo simulation, and an index fund. 3. The portfolio will include stocks from sectors like FMCG, automobile, pharma, IT, and manufacturing, with the objective of optimizing the portfolio to maximize return subject to constraints on minimum and maximum weights for each stock.

Uploaded by

luong.hng43
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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OBJECTIVES

1.PORTFOLIO OPTIMIZATION BY SELECTING n STOCKS


OF NYSE OR ANY STOCK EXCHANGE USING MCDOE
TECHNIQUES

2.COMPARISION OF AVERAGE RETURN OF A


PORTFOLIO DESIGNED USING:
1.MPT OR ANY THEORY (already recognized)
2.MCDOE TOOLS
3.INDEX FUND (safest investment)
INTRODUCTION
A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash
equivalents, including closed-end funds and exchange traded funds (ETFs). People generally believe that
stocks, bonds, and cash comprise the core of a portfolio. Though this is often the case, it does not need to
be the rule. A portfolio may contain a wide range of assets including real estate, art, and private
investments.

Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of
considered portfolios, according to some objective. The objective typically maximizes factors such
as expected return, and minimizes costs like financial risk, resulting in a multi-objective
optimization problem.

We will optimize a stock portfolio.


STOCKS 2022 2021 2020 2019 2018 WEIGHT%
1 from FMCG A
sector
1 from automobile B
sector
1 from Pharma C
industry
1 from IT industry D
1 from E
Manufacturing
sector

𝑓1 = max (return) Outputs


Optimization criteria 1.Weights of the stocks
𝑓2 = min (risk)
Constraints of minimum and max weights:
X%< A,B,C,D,E<Y%
Return by portfolio optimized by MPT or any
%return theory
For Return given by an INDEX FUND(say
a3 S&P 500)
Particular
period a2 Our portfolio
b3 return
a1 b2

b1 c3
c2
c1

n1 n2 n3

Different combinations of stocks

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