Portfolio Optimization Project

Abstract

This project aims to reduce the non-Gaussian effects and assess portfolio optimization using the Index Model and Markowitz Model for the recent 20 years of daily total return rate for the ten renowned stocks of the first group. It is important to recognize that the S&P 500 equity index and 1-month Fed Funds rate are used as a proxy for the risk-free rate. The daily data is aggregated into the monthly observations, and optimization inputs are calculated based on the monthly observations. In addition, using optimization inputs for the Index Model and Markowitz Model, regions of different permission portfolios are identified.