In my previous post I highlighted the flaws associated with Beta (β), in this post I would like to explore the proper use of Beta. Studies have shown that managed portfolios only outperform the S&P500 Index about 1/3rd of the time in both bear and bull markets - this means that for 2/3rds of the time it is better to just invest your money in an index fund, and...

The following is a brief list of definitions for beta from various textbooks and research papers.  Though brief, I believe that this is a representative sampling of the modern perceptions regarding beta. Damodaran – “standardized measure of the risk that investment adds to the market portfolio.”  “Statistically, the beta of an investment measures how it co-­‐varies...

In my previous two posts regarding the Markowitz Portfolio Theory, I did not consider the dividend yield in the optimization to reduce the complexity of the model.  In this post I will explore the impact of adding the dividend yield to portfolio selection, plus verify the stock’s selected by checking if they are presently undervalued. You can download the...

In my previous post on solving the non-linear Markowitz Portfolio equation Portfolio Optimization, I used the minimization of CV as my objective function, and used Excel’s Solver (made by Frontline Solutions and bundled with Excel), and Frontline Solution’s Premium Solver to optimize a portfolio of stocks taken from the  the S&P 100 Index.   In that...

Using the same model that was explored in a previous post Markowitz Portfolio Theory, but enhancing this model by using FrontlineSolver’s Risk Solver Platform, the model could be extended to more constraints.  What I wanted to explore is whether constraining the maximum percent weight of any individual stock in the portfolio would sub-optimize the solution....