The Professor Selects a Portfolio of Chinese Stocks
A professor decides to build an equity portfolio made up of shares from five Chinese companies, and needs to decide what fraction of the portfolio should be devoted to each of the five issues. In this exercise, the difficulty in using optimization for portfolio selection and coping with the covariance between the potential assets is examined. Simulation can be used to avoid the need for statistical estimation in measuring portfolio risk. Excel files are available, products 7B01E010A and 7B01E010B.
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