Document Type masters report Author Name Zhuang, Ziyi URN etd-042512-161546 Title The Portfolio Optimization Project Degree MS Department Mathematical Sciences Advisors Blais, Marcel, Advisor Vernescu, Bogdan, Department Head Keywords optimal portfolio factor model CAPM Date of Presentation/Defense 2012-04-28 Availability restricted
This project has three parts. The first part is to use the efficient frontier and find the tangency portfolio to form our optimal portfolio. We built our portfolio using the Interactive Brokers software and rebalanced every week for 4 holding periods to see the relationship between our projected returns and actual market returns. In the second part we considered the Capital Asset Pricing Model (CAPM) and ran linear regressions on the stocks we chose in the first part of the project. This process is based on our idea of finding the systematic risk in each stock to improve our stock choosing ability. In the last part we introduce the concept of factor models and add more factors into our original CAPM model. Via a back-testing method, we test the reasonability of our factors and give advice to further improve our portfolio optimization project.
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