Decision Models & Analytics
Portfolio Optimization

Suppose we are providing investment advice to Ms. Liu, who has some savings to invest. She has identified five stocks that she would be interested in investing in:

  •    Apple Inc. (AAPL)
  •    Amazon.com, Inc. (AMZN)
  •    Walt Disney Co. (DIS)
  •    Whole Foods Market, Inc. (WFM)
  •    Wal-Mart Stores, Inc. (WMT)

Ms. Liu is stumped by the question of how to allocate her investment among these five stocks. She would like to maximize the annual return and to minimize the risk. To help Ms. Liu, we collected data from Yahoo Finance on the daily prices of the five stocks over a ten-year period, from 10/17/2005 to 10/15/2015. See the table below and the data file.

Date AAPL AMZN DIS WFM WMT
10/15/2015 111.80 33.64 59.33 562.36 107.89
10/14/2015 110.21 32.92 60.03 544.83 105.73
10/13/2015 111.79 33.24 66.73 548.90 106.59
10/12/2015 111.60 33.65 66.93 550.19 106.35
10/9/2015 112.09 34.24 66.69 539.08 105.56
10/8/2015 109.50 34.15 66.88 533.16 104.61
...
10/25/2005 7.49 32.38 37.16 46.17 20.74
10/24/2005 7.59 32.27 37.83 46.93 20.55
10/21/2005 7.44 31.24 37.43 45.95 20.27
10/20/2005 7.50 30.86 37.34 45.01 20.25
10/19/2005 7.34 30.97 37.65 45.86 20.67
10/18/2005 6.97 29.94 36.95 44.65 20.63
10/17/2005 7.14 29.79 37.04 45.02 20.72

How would you help Ms. Liu choose her portfolio allocation?


- PDF version of this problem
- Excel template with data
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