I have so much respect for how a good explainer you are. This video is amazing. Very clear, structured and most importanty calm (good comfort for ones who find these processes taunting already).
@K.praveenkumar963 жыл бұрын
I wanted be a professional portfolio manager, this will help me to understand much better
@JoshxDude922 жыл бұрын
I did my senior project on optimization for my math degree and I tried applying it to my investments. I kept getting stuck and frustrated and your video showcased what my problems were: I didn't have a good objective function (I didn't know about the Sharpe Ratio) and I wasn't using my tool correctly (I didn't know about the Ctrl+shift+enter you had to do for matrix multiplication). Thank you so much for explaining these things, I'm going to try these out as soon as I can.
@adouokoma9496 Жыл бұрын
Hey Josh! I could you please tell me the title of your project? I am also majoring in math.
@Acampandoconfrikis2 жыл бұрын
Massive thanks. Seeing how things are done is way easier than trying to understand the formula... at least for me :P
@brianputt9847 жыл бұрын
Rather than just using the closing prices, adjusted prices that consider dividends should be used. ATT is low because their dividend of about 5% is being excluded. The adjusted prices are available from Yahoo. Also, the annual return should be compounded and not just the monthly return times 12.
@chris99586 жыл бұрын
I agree with you to take adjusted prices instead of closing price. Regarding your second remark I disagree since the whole calculation is based on arithmetic returns and not geometric returns, therefore multiplying by 12 is the right approach.
@shahiranazira22 жыл бұрын
Thank you so much for your explanation! i finally figured out the error that i've been trying to identify for the past few hours 😭
@mardywilly61353 жыл бұрын
Thanks alot sir I really appreciate your help with this video, I became successful in the online trading market because I decided to do my homework and not enter the market as a novice Thanks to your mentoring program Mr Romero pieto.
@harrisonwealth56413 жыл бұрын
His consistency in profiting his various clientele really amaze me when Trading on their behalf.
@jessicavincent90973 жыл бұрын
Yes in recent times I profit weekly when investing with Mr Romero pieto he indeed trades on my behalf, making me earn much profit every week.
@anastaciajames69843 жыл бұрын
Highly intensive teaching sir.
@waynefrank28183 жыл бұрын
Many thanks to Mr Romero pieto for helping me and my family this year I invested with him with the minimum amount of $20,000 and he profits me $78,000 per week his indeed an heaven sent.
@oliverbenito56143 жыл бұрын
Jessica Vincent Am from Greece 🇬🇷 and am also a newbie in the online Trading market so please how can I get hold of Mr pieto and his trading services ?
@germangonzalez71856 жыл бұрын
thank you so much sir. This is perfectly explained, this is exactly what i needed.
@lizardodavinci20935 жыл бұрын
Hast du zufällig deine Bachelor Arbeit dazu geschrieben?
@vanderdossantos66763 жыл бұрын
Thank you for that tutoring. I was very confused and now it is much clearer.
@leticiadrummond8133 жыл бұрын
Thank you very very much! You just helped me to solve a problem in my article!
@AllinOne-bv6pq4 жыл бұрын
Impressive work Sir i wana,more videos on portfolios risk ans return comparison between stocks Your method of teaching is very good
@marcorizzi32793 жыл бұрын
Hello, I don't understand for the last formula to calculate y* how dow you decide the A value. There's a range of values based on risk aversion? Thanks
@choyonmazumder37804 жыл бұрын
Thanks Sir! Such a complete guide for the beginners. Much appreciated.
@germaniamoney9424 жыл бұрын
Thank you very much for your tutorial. it worked nicely for me. Great job !
@prof.higgins31544 жыл бұрын
There is another, less cumbersome, way to fill in all the Variance/Covariance values which can be done in less than a minute. Might be handy if you have >4 assets/stocks... Go to DATA Select DATA ANALYSIS Select COVARIANCE Fill out the Dialog Box and create the COVARIANCE Matrix COPY & PASTE THE MATRIX with the Headers anywhere in your Sheet COPY the values only from the original matrix PASTE SPECIAL in the new Matrix after selecting the Values only In PASTE SPECIAL select VALUES, SKIP BLANKS, TRANSPOSE and click OK The Matrix should now be completely filled in, but you still have to multiply by 12 Type 12 in an empty cell and COPY it Select all the values in the new matrix Select PASTE SPECIAL Select MULTIPLY and click OK
@rameshadhikari80233 жыл бұрын
What you just described is population variance, how do you find sample variance?
@Spang4203 жыл бұрын
I have one thing I'm thinking of. Would it be possible to deviate from the MPT and for the historically expected returns (used for the sharpe ratio) instead use forecasted returns based on DCF or similar? The resulting weights should then better fit future expectations of the return rather than the historical, or is my way of thinking causing some unwanted side effects?
@DanielDiCesare8 жыл бұрын
Nicely done, very thorough
@tinneswarisingaravelo75753 жыл бұрын
Thank you!!! Such a great explanation...
@imperialwarhawk123abc5 Жыл бұрын
So avg monthly returns being multiplied by 12 and that being the annual is slightly wrong conceptually. For example a avg monthly return of 0.75% across 12 months will yield a return of 9.381% But if you multiply it like you did in your video it comes out to 9.00%. Maybe I'm misunderstanding this but idk if this is just a simple draw back of using this method
@franciscolozano23846 жыл бұрын
Excellent demonstration thanks.
@winstonwithay19804 жыл бұрын
Thanks a lot for the video. I had a couple of questions though. 1. How would this change if you were using daily instead of monthly returns? 2. How would it change if short-selling was allowed vs. if short-selling wasn't allowed? Thanks for the help
@Luigi-mh1zh2 жыл бұрын
After 1 yr here is the reply, 1-it dosent change much, it change for the fact that for the annual return you don’t have to multiply by 12 but for the number of day. 2-if it’s allowed to use negative weights then if in the portfolio there are very low performance stock the weight could be negative, that means that it’s optimal if you short that stock, otherwise if you don’t use negative weight the optimization should say that the optimal weight is 0
@rexcall13673 жыл бұрын
Very well explained
@linlidong45667 жыл бұрын
That is great and really helpful!!! Thank you soooo much!
@sylviah15513 жыл бұрын
Thank you so much!!This is really helpful
@mikeg40753 жыл бұрын
You SAVE my exam!!!!!!!
@robertoletts88155 жыл бұрын
isnt the correct way to make the monthly return to annual return --> ((1+mr)^12-1) mr=monthly return, same for the variance?
@Stasthagod5 жыл бұрын
Roberto Letts there are so many things wrong with this video. Including the returns. You are right, for returns for more than a one year period you want to use the formula ((1+mr)^12-1). The variance needs to be multiplied by the square root of 12, the time ratio because of the assumption of random walk theory and because standard deviation of a portfolio scales disproportionately, i.e it is not additive. Finally, when he multiplies the covariance matrix by 12, I have no idea why or how mathematically that works because it is squared standard deviation. If you take monthly data and run the solver function for covariance it will spit out the correct numbers, but even assuming his logic of “annualizing” them. Take the same stocks and get annual returns. You will not get the monthly variance *12.
@kennethc75774 жыл бұрын
@@Stasthagod the return is arithmetic or geometric, it should be approximately acceptable. The writer is right on "variance" multiply 12; if "standard deviation", square root of 12 as a multiplier.
@giorgiobellici94382 жыл бұрын
i have some problems with the solver... it says that it had found a solution but when i click 'okay' it doesn't change the weights or anything else... and i followed all the stes to use it help :)
@paolofu98813 жыл бұрын
How do i calculate my own A (investor risk aversion)?
@riyazhudda37726 жыл бұрын
Really helpful and concise
@user-fb4vl9jw7r8 жыл бұрын
Why not use LN to calculate monthly return?
@kamalikapoddar4 жыл бұрын
Great explanation. Could I please have access to the document used in the video as well?
@jakdorosnezostanewikingiem28178 ай бұрын
It reminds me of my University :)
@dodo1011017 жыл бұрын
This video is very clear!
@ponsavita59364 жыл бұрын
it was very helpful. Thanks a lot!
@vainoner7 жыл бұрын
Very nice work. One question though, what is the range of A (risk aversion)? I mean what does the number 10 stand for?
@jujanangelo7 жыл бұрын
10 is an indicator for high risk averseness.
@jameswilliam98017 жыл бұрын
It is usually around 2-3 according to a paper I read, and empirically it is around 2.25 from some psychological experiment
@sudhanvar.vasisht98804 жыл бұрын
@@jujanangelo Yeah so is 10 a percentage value or an absolute unit? Is it like 10% risk averseness?
@whatitmeans6 ай бұрын
Would you recommend to use Kelly's Criterion for the last shown proportion?
@vanzylventer99412 жыл бұрын
I can't access the document without paying a subscription fee on coursehero. Is there any other way for me to access the full document?
@summerpromisesusalifee2 жыл бұрын
Thank you very much. So valuable. Could you please share the data (excel file) for me to practice? I would like to do it on my own and check with your result to make sure I follow your steps appropriately
@stanislavstanislavsky22282 жыл бұрын
Does anybody have explanation(link?), how shall this be adjusted to stock prices? Here we sum up relative returns, not taking into account prices of assets, but they are different. Say, 1% return of 100$ stock is obviously bigger than 1% return of 1$ stock.
@danieldaniel-ri2mu Жыл бұрын
Huge respect❤
@nikanhaj43942 жыл бұрын
well taught , thank you
@parsanikoy59854 жыл бұрын
great video very helpful
@abalint80975 жыл бұрын
excellent work
@MTChannelGo6 жыл бұрын
Very clearly and easily to understand. Could you share your documents (word and excel files) ? Thanks!
@nemogage8392 Жыл бұрын
24:40 How would you calulate the Standard deviation of the proportion portfolio with the risk free asset?
@svandalsem Жыл бұрын
Hello Nemo, the standard deviation of the return of the risk-free asset is 0%. So the complete portfolio (the combination of the risky portfolio and the risk-free portfolio) has a standard deviation of the proportion of the complete portfolio invested in the risky portfolio multiplied by the standard deviation of the risky portfolio. For example, if the standard deviation of the risky portfolio is 20% and 60% of the complete portfolio is invested in the risky portfolio, then the standard deviation of the complete portfolio is 0.2 x .6 = .12=12%. I hope that this answers your question.
@gvenkatesh19934 жыл бұрын
Could someone please provide academic references to the information/ Formulae at the beginning of the video
@gvenkatesh19934 жыл бұрын
I just want to let you know that the link to the document given in the description throws 404: Page Not Found
@gracewaithera76834 жыл бұрын
Really helpful. Quick question though. What will I need to make different if I want to get the constrained minimum variance portfolio?
@nicbono49943 жыл бұрын
Great video! Thank you!!!
@rh_mhmmd Жыл бұрын
Superb
@ZoarkadoZenos4 жыл бұрын
Hi, if we have more than 10 assets that are from different industries (i.e. at least 2 stocks in each industry), can we still use this method?
@BlitzWalkthrough Жыл бұрын
Amazing video!
@Koran901235 жыл бұрын
Thanks for this helpful video. But why did the produce the co-variance matrix manually? Could have used data analysis...
@choyonmazumder37804 жыл бұрын
How Sir? Can you share any link ?
@prof.higgins31544 жыл бұрын
@@choyonmazumder3780 Go to DATA Select DATA ANALYSIS Select COVARIANCE Fill out the Dialog Box and create the COVARIANCE Matrix COPY & PASTE THE MATRIX with the Headers anywhere in your Sheet COPY the values only from the original matrix PASTE SPECIAL in the new Matrix after selecting the Values only In PASTE SPECIAL select VALUES, SKIP BLANKS, TRANSPOSE and click OK The Matrix should now be completely filled in, but you still have to multiply by 12 Type 12 in an empty cell and COPY it Select all the values in the new matrix Select PASTE SPECIAL Select MULTIPLY and click OK
@rjad37 жыл бұрын
Mr. Van Dalsem, You are a weapon mate. Top stuff. Sincerely, Some very stupid finance students xo
@yingfeng94043 жыл бұрын
thank you! that's really helpful! :)
@GaurangPatel12 жыл бұрын
What's the range of possible values for A? How do we quantify A? What does "10" mean for instance?
@hamid_7753 жыл бұрын
Thanks for great video. Risk-free asset is a fixed term in solver for maximisation. So, the weights will be the same for any given risk-free. right? if so, what is the role of risk-free asset factor in your calculations?
@agungwicaksono44683 жыл бұрын
Thank you Mr. Dalsem for your amazing video. I have a question, how can we determine the weighted value for each stock? Is that depend on how many fund we invest in?
@joelhastings80145 жыл бұрын
Thank you for this great video . Question? Checking the box “make unconstrained variables non negative” on solver is to NOT short sell. But if the solver gives you a value of “0” for weights , wouldn’t that mean to short sell? If it’s “0” doesn’t that mean to NOT INVEST into that particular stock ?
@asd32624 жыл бұрын
Joel Hastings If it shows 0 for weights then it simply means not to invest in it at all. Does not mean to short sell which would be going negative weights.
@clmkc53934 жыл бұрын
Question on your investor risk tolerance level. How did you derive the "10" and its relation to the 97% allocation into risky assets?
@stasudovin54322 жыл бұрын
Thank you so much for video. Can you please advise min period of prices in tabel. You have data from 1/4/2011 up to 1/4/2016. Is it importante to have data for 5 years? Thank you in advance. Have a nice day.
@jhendric984 жыл бұрын
Could you just upload the document to Github? The link is broken.
@svandalsem4 жыл бұрын
Hello Jimmy, I've updated the link.
@dyer4403 жыл бұрын
Well done.
@claudiodiascarvalho4 жыл бұрын
Very interesting. Thanks. Can I ask what do you use to develop efficient frontier asset allocation area graphs? Is it possible with Excel or do you use Python or other tool?
@mikeylejan88493 жыл бұрын
I have 1,250 ETF lists from the New York Stock Exchange I need help on how to choose optimal portfolios using cumulative Abnormal return and Behavioral ETFs
@giangluu4142 Жыл бұрын
Can you explain one more time about the proportion?
@ricardoafonso75633 жыл бұрын
. Thank you Encouraging .
@phantom86735 ай бұрын
i dont understad at all , inthe matrix is the same company should be 1 right??
@driesweekers56227 жыл бұрын
Could you please send me the word document at the beginning of the video? Would be a big help!
@AI_Masterpiece_4 жыл бұрын
Thank you! Helped me out
@ronironi894 жыл бұрын
Hi! I tried with 14 different shares and after using solver, 9 of them were suggested as 0% of the portfolio. Do you know why?
@svandalsem4 жыл бұрын
That's not uncommon. For my examples, sometimes I have to go through many different companies that will give me weights greater than 0 for all of them. The ones that have 0 weight likely have low or negative returns and/or high volatility and don't improve the risk-return relationship for the portfolio.
@marieinglis2476 жыл бұрын
If you do not know the degree of risk aversion, how do you calculate y* to get the optimal weights for the risky and risk free portfolio?
@David-kg2bu9 ай бұрын
Rule of thumb: 3 or 4
@TheOrangeSqueezer4 жыл бұрын
Hi Shane.Nice video. It's very informative. Do you have an updated link for the referenced document? the old link seems to be broken. Or maybe you have the title for the document that I can look it up. Thanks!
@svandalsem4 жыл бұрын
Updated
@leylarojas43307 жыл бұрын
Great video!
@rishanavp52132 жыл бұрын
can anyone explain the matrix notation of the standard of deviation of the portfolio please....
@deepbhajiwala60622 жыл бұрын
Great
@timokrkos46894 жыл бұрын
Hi, do you still have that document ? Because that link does not work :). So if I may ask you for update once again :)
@bebedelasat63002 жыл бұрын
thanks bro
@timvanandel2376 жыл бұрын
My solver does not change any of my weights even though it says it found a solution. I’m using excel 2010
@ImmiTheKhan2 жыл бұрын
How did you get the risk aversion level of 10? what does it actually signify, can you tell me please? only that part is not clear to me.
@sudarshankadariya7364 жыл бұрын
Much appreciated.
@franciscocastillo83463 жыл бұрын
What's the difference between Markowitz portfolio optimization and risk parity portfolio optimization? Is it the same process in Excell for both?
@jeffbezos96003 жыл бұрын
Shane I'm having trouble with the Expected Return Calculation - I've compiled 40 equity's for the analysis and can't seem to get it to work, could you help me by chance? Trying to do this for some extra credit
@shibrik4 жыл бұрын
Is this the Modern Portfolio Theory ? And can we create an Efficient Frontier Chart with this ?
@boom86363 жыл бұрын
Much thanks!!!!
@asadimran41353 жыл бұрын
Thanks mate
@arielchristiansen69904 жыл бұрын
You should use geometric mean not arithmetic mean. It would be skewed a lot.
@MarioElFather5 жыл бұрын
thank you so much
@squirrel46353 жыл бұрын
I get something like 400% into risky portfolio and -300% into risk free asset. Am I doing something wrong or do I need to borrow all the money and invest it in the risky portfolio with 4x leverage?!
@svandalsem3 жыл бұрын
In Solver you can you can choose to require that the weights all be positive (including 0).
@ana_86963 жыл бұрын
Great video!! I have one question: Great video!! I have 12 assets and their prices of 29 different weeks. I want to do portfolio optimization by minimizing the Mean Absolute Deviation. I have calculated r, E[r] , E[r-E[r]] and |E[r-E[r]]| using Excel . What do I have to do next?
@svandalsem3 жыл бұрын
Hello Anastasia, I would need to see the worksheet that you are working on to answer that question.
@laurenselderhorst23144 жыл бұрын
What is your reccomendation if you had 3000 different stock. Only using the ones on the efficiënt frontier? OR should i only use 4 of the seemingly best ones, also, do i include the Risk free rate?
@jsinla13 жыл бұрын
This is a great video, but I have one question. From what I understand, the usual range for the risk aversion coefficient (A) is 0-5. However, if I plug in the value of 5 for A, the allocation percentage to a risky asset comes out to 195%! This is the result I get using the values in the video: ER=13.61%, RFR=3%, and SD=10.44%. What am I doing wrong?
@pkking678z2 жыл бұрын
That would be leveraged, and you would short risk free and use those proceeds to invest in risky asset
@wendyamirulsusilo72218 жыл бұрын
thanks
@johnnguyen31157 жыл бұрын
thank you!
@masthai21543 жыл бұрын
hye, how can i fix for N/A error.. i stuck on COVAR.
@kurahell40624 жыл бұрын
Could you please upload again the document?, I tried to access the document with the link in the description but I can't open it on my browser... I don't know if it's just me or someone else has the same problem... Thank you!
@svandalsem4 жыл бұрын
Updated
@marcelotorres57363 жыл бұрын
Should'nt the annual variance be calculated in the following way: 12^12*V(x) ? Thanks for answer
@svandalsem3 жыл бұрын
no
@marcelotorres57363 жыл бұрын
@@svandalsem ok, thanks. I was confused.
@keshavkantprasad98982 жыл бұрын
the reference link is paid one can you share the reference
@susantoautistv18953 жыл бұрын
what should i do if one of my stock 0% after i used the solver
@markuseldh63476 жыл бұрын
Great video. Just one question. Does this approach work for a 3 asset portfolio as well?
@mishamalakyan5 жыл бұрын
This approach should work with a minimum of 2 stocks and theoretically above 2 number of stocks.
@roberthuff31225 жыл бұрын
Tried to purchase the offered accompanying documents, but the plasso commercial site is inaccessible because of an expired SSL certificate.
@svandalsem5 жыл бұрын
Hello Bob, I checked the link and didn't receive the error that you mentioned. I've had a few people access and download the document since you originally sent me an e-mail and did it myself without any problems. Unfortunately, I don't run the website where the document is posted. You might try using a different browser.
@roberthuff31225 жыл бұрын
@@svandalsem Thanks, Shane. Chrome worked but Opera, Firefox, and Edge all reported an SSL certificate expiration error (46 days) and blocked a purchase. Makes me suspicious of Chrome as It should have done the same. Seems that Plasso has been acquired by another company, perhaps explaining a miscommunication about the site's SSL certificate configuration. If you have a contact at Plasso, you may want to inform them. Also, is the finished Excel doc available? Yes, I am lazy...:-) Thanks again.