Bus 463 Project Report Sample
Bus. 463 Project Report, Extended
Geo Mean, Jensen-Alpha Measure
April 1st, 2013
Table of Contents
Client Description……………………………………………………………………………………3
Discussion of Models……………………………………………………………………………...4 Markowitz Model………………………………………………………………………..4-5 Single-Index Model………………………………………………………………………..5 Geometric Mean…………………………………………………………………………….6
Recommendations…………………………………………………………………………………6-7
Analysis……………………………………………………………………………………………………7
Appendix A………………………………………………………………………………………………8
References……………………………………………………………………………………………….9
Client Description Joe Schedin is 45-years-old, who has spent the last 18 years working for Costco as a meat cutter. He will be switching jobs as he wants to do something new and more exciting so he will be able to contribute $110,000 to add to the current portfolio. He wants to be able to retire in 20 years, by age 65, and would like to have at least a million dollars for retirement as well as a surplus of greater than or at least $40,000 in order to pay for his new step-son’s college fund. He would like to be …show more content…
It is purely math and statistics based and does not use any financial assumptions. It would be classified as a mean-variance model or rule. The model has a few assumptions: investors will base their decisions based on risk and return, which would be the variance and mean are the only parameters of interest. The other assumption is investors are only concerned with their terminal wealth, which is only what income their portfolio or investments will generate in the future; they are not concerned with the value of their portfolio before they invest. The MM simply uses historical stock price data to evaluate securities based on three factors: the mean, variance, and covariance. (Dacey, Class Notes Ch.6, 2013), (Financial Modeling Agency,
Geo Mean, Jensen-Alpha Measure
April 1st, 2013
Table of Contents
Client Description……………………………………………………………………………………3
Discussion of Models……………………………………………………………………………...4 Markowitz Model………………………………………………………………………..4-5 Single-Index Model………………………………………………………………………..5 Geometric Mean…………………………………………………………………………….6
Recommendations…………………………………………………………………………………6-7
Analysis……………………………………………………………………………………………………7
Appendix A………………………………………………………………………………………………8
References……………………………………………………………………………………………….9
Client Description Joe Schedin is 45-years-old, who has spent the last 18 years working for Costco as a meat cutter. He will be switching jobs as he wants to do something new and more exciting so he will be able to contribute $110,000 to add to the current portfolio. He wants to be able to retire in 20 years, by age 65, and would like to have at least a million dollars for retirement as well as a surplus of greater than or at least $40,000 in order to pay for his new step-son’s college fund. He would like to be …show more content…
It is purely math and statistics based and does not use any financial assumptions. It would be classified as a mean-variance model or rule. The model has a few assumptions: investors will base their decisions based on risk and return, which would be the variance and mean are the only parameters of interest. The other assumption is investors are only concerned with their terminal wealth, which is only what income their portfolio or investments will generate in the future; they are not concerned with the value of their portfolio before they invest. The MM simply uses historical stock price data to evaluate securities based on three factors: the mean, variance, and covariance. (Dacey, Class Notes Ch.6, 2013), (Financial Modeling Agency,