Date of Award

5-2020

Degree Type

Thesis

Degree Name

Departmental Honors

Department

Accounting

First Advisor

Benjamin Blau

Abstract

There exists an efficient frontier upon which there is an optimal point of allocation of an investor’s assets among different types of investment vehicles. Identifying this point and allocating a portfolio accordingly allow an investor to capture the highest market return with the least amount of risk. This research study offers a model which can be used to find this optimal investment allocation and discusses the challenges and assumptions associated with using it. Using techniques discussed in Markowitz (1952), we obtain the optimal allocation of wealth for two portfolios of 13 and 12 assets, respectively. Such a model is not intended to portray the “perfect” portfolio allocation but provides context for decision making based upon the desire for high returns and investor’s aversion to risk. This model allows for optimal allocation, both with and without constraints to short selling. The results from the models have important implications by providing investment advisors more sophistication when assigning allocation weights. Instead of assigning these weights arbitrarily, which is common in wealth advisory, our model provides direction for obtaining the weights corresponding to the efficient frontier.

Included in

Accounting Commons

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