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#L09: Review
Lecture Overview
In this lecture we will work on an application that tries to incorporate most of the tools we learned so far.
Real-World Application: performance of main asset classes
From Yahoo Finance, download monthly data on the SPDR S&P 500 ETF, the SPRD Gold Shares ETF, and BlackRock’s long-term (20+ years) treasury ETF (tickers: SPY, GLD, TLT respectively).
- Download monthly data from 2005 to 2022 and calculate monthly returns (use Adj Close)
- Plot cumulative returns on these assets over time
- Calculate Sharpe ratio for each asset
- Calculate optimal tangency portfolio using these 3 assets
- Calculate Sharpe ratio of tangency portfolio
- Calculate optimal capital allocation if risk aversion is A = 4
Cumulative returns
Sample statistics of individual assets
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#Tangency portfolio weights
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#Sample statistics of tangency portfolio
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#Optimal asset allocation weights
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