country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

MIS775 Decision Models For Business Analytics

tag 0 Download5 Pages / 1,055 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

The assignment is in three parts, 1,2 and 3. The requirements of each part are detailed below.

Assignment Details:

This assignment is designed to let you explore and evaluate a number of approaches to investment portfolio optimisation, using live real?world data. The relevant URL for finding stock prices is: https://au.finance.yahoo.com/ under the “Quote lookup” search. In this assignment you will use asset return data from a period of 4 years to identify the optimum portfolio using a variety of different optimisation methods and according to each of these methods.

Preliminary Work

The first stage is to identify a set of 15 investment items from which you will subsequently determine optimum portfolios, subject to various optimisation models. You may select any global assets (including indices) whose data is provided on the Yahoo finance website. The 15 assets chosen must satisfy the following general constraints:

Each must have at least 48 months (March 2014 ? March 2018) of monthly data available, up to and including March 2018.

They should be selected from 5 different sectors/categories (C1, C2,…, C5) e.g. banking, pharmaceuticals, media, technology, government bonds, property trusts, etc. – your choice, with at least 2 assets in each category.

They should span a reasonable range of volatilities/risk. Classify the assets into 4 groups according to (ascending) risk (R1, R2, R3, R4). It is up to you to determine the basis for the classification, but ensure there are at least 3 assets in each of R1 to R4 – this is a slightly arbitrary requirement! A simple, and acceptable approach would be to divide the range of risks into 4 quartiles, as long as the previous requirement is met.

Recall that each asset lies in one of the Rs and in one of the Cs.

Optimisation parts

The assignment requires you to consider three different approaches to portfolio optimisation:

  1. Choosing according to asset class restrictions, and individual asset risk appetite.
  1. Choosing according to portfolio size restrictions and risk appetite.
  1. Choosing according to portfolio risk and return requirements.

These three approaches allow exploration of three different optimisation techniques: linear programming, integer programming and non?linear programming:

  1. LP model: In this approach, the aim is to achieve the maximum overall return, subject to specified requirementson risk mix (percentages in R1 to R4) and category mix (percentages in C1 to C5). These requirements may be simple – such as “no more than 10% in R1, or more complex such as “there should be as much invested in R1 as there is in R4”. Other restrictions might be of the form – “at least 25% should be in the banking sector, and no more than 20% in energy”. It is up to you to determine the restrictions that you wish to impose. I expect these to be “sensible”, respecting a sense of diversity in the portfolio, and a defendable risk acceptance approach. The only requirement is that they should respect the learning aims of this assignment and therefore they should not in any way trivialise the problem. As an example, there should be realistic range requirements for each of R1 to R4, and C1 to C5. To require all assets in the portfolio to be in risk category R1, for example, would be to trivialise the problem.

Use a sensitivity analysis report to comment on how changes to the risk and category constraints might affect the optimum portfolio.

  1. ILP model: In this approach, we assume that a balanced portfolio of exactly 8 stocks is to be chosen. The 5 assetcategories (the C classification) have to be included. In addition, at most 2 of the assets can be in the riskiest group R4, and at least 2 must be in the least risky group R1. The goal is to achieve the maximum overall return, subject to these specified requirements.
  1. NLP model: In this approach, the aim is to optimise without category constraint using the methods of Module 1,topic 3 – i.e. considering the overall portfolio risk/return profile. There are three sub?problems here:
  1. Achieve the maximum overall return, subject to an upper limit on portfolio risk (your choice of limit).
  2. Achieve the minimum portfolio risk, subject to a requirement to achieve at least a specified return (your choice of required return).
  3. Achieve the maximum of risk adjusted return (Sharpe ratio).

Summarise your report (all of above parts) in a Powerpoint, present all your results comparatively in a coherent and compelling manner, and then, based on your assessment of the various approaches, explain briefly about a strategy that you might prefer to use for portfolio optimisation. For each optimisation model, explain about the optimisation approach taken, the mathematical formulation and identify the Excel Solver to be used (explaining any particular constraints used – e.g. that a variable needs to be an integer, or binary).

Assignments will be marked based on the methodologies adopted, and the quality of work. Given the vast range of assets to select from on the yahoo site it is highly unlikely that you will choose the same portfolio of stocks as.

 

Answer:

Introduction

  • 15 stocks from the ASX (Australian Stock Exchange) are evaluated using the LP model, the ILP model, and the NLP model as approaches in optimizing the portfolio
  • The securities are chosen according to restrictions of asset classes and individual risk appetites
  • The securities are also chosen according to the portfolio size restrictions and risk appetite, as well as based on portfolio risk and the required return
  • Preliminary work done by choosing and classifying securities into industries and according to risk
  • Stocks chosen from mining and energy (C1), Materials (C2), Financial Sector (C3), Retail (C4), and Pharamaceuticals, Biotechnology and Life Sciences (C5)
  • The Stocks are then classified based on Risk

Chosen Stocks

C1 Mining and

Materials

Financial

Retail

Pharmaceutical

Energy

 

Sector Services

 

s,

 

 

 

 

Biotechnology

 

 

 

 

& Life Sciences

APA Group

Alkane

Commonwealth

Woolworths

ACRUX Limited

(APA)

Resources

Bank of Australia

Group Limited

(ACR)

 

Limited (ALK)

(CBA)

(WOW)

 

BHP Billiton

ABM Resources

ASX Limited

Accent Group

AUSCAN Group

Limited (BHP)

NL (ABM)

(ASX)

Limited AX1

Holdings Ltd

 

 

 

 

(ACB)

Caltex Australia

Alicanto minerals

AMCIL Limited

AP Eagers

ALCHEMIA

Limited (CTX)

Limited (AQI)

(AMH)

Limited (APE)

Limited (ACL)

 


Classification Based on Risk

  • The risk levels for each was is determined by historical performance data
  • Data was collected on a monthly basis (average monthly stock prices) for the past 48 months
  • The volatility of the stock determined its risk
  • Volatility computed as a function of standard deviation of the stock performance
  • Standard deviation for each stock computed using data from past 48 months

Risk

  • Solver used with the standard deviation formula in a spreadsheet
  • The goal of the investment is to balance between risk and returns
  • The portfolio to be made up of 50% low risk assets and 50% high risk assets
  • The high risk assets are likely to result in higher returns but at a higher risk

Classification Based On Risk

  • Computing standard deviations gave a range of between 1 and 10.34
  • This was used to create percentiles for risk by dividing the range into 4 percentiles from low risk to high risk
  • The lower the standard deviation, the lower the risk but also the lower the expected returns
  • Risk classes are R1, R2, R3, and R4, in increasing order of risk
 

Risk Classification

Low Risk (R1)

Medium Risk (R2)

High Risk (R3)

Very High Risk (R4)

Volatility between 0

Volatility between

Volatility between

Volatility over 7.5

and 2.5

2.6 and 5.0

5.1 and 7.5

 

ALK

CTX

CBA

BHP

ABU

WOW

 

ASX

AQI

 

 

 

AMH

 

 

 

AX1

 

 

 

APE

 

 

 

ACR

 

 

 

AC8

 

 

 

ACL

 

 

 

APA

 

 

 


Details and Assumptions on Investment

  • For the case, we assume there is $ 10000 to invest
  • The goal is to maximize returns at the lowest risk
  • Three approaches are used; Linear programming function,

Part 1: LP

  • Done in a spreadsheet using solver
  • The first step entailed giving each of the stocks values based on risk profile (volatility)
  • Low risk are denoted L, medium risk are denoted M, high risk are denoted H, and very high risk are denoted V
  • An objective function is then created based on the expected returns and the risk appetite

LP

  • The objective function is subject to some constraints
  • That L+M+H+V must be less than or equal to $ 10000
  • The target of investment is to spread out risk but have a chance for highest returns
  • Each asset risk class will have no more than $ 2500 invested
  • The other condition therefore is that L+M+H+V must be equal to or less than 2500
  • The objective is to maximize revenue
  • The trivial constraints are that L+M+H+V must be greater than or equal to 0
  • The target yield is one that is above 4.3%, which is the average annual yield of the ASX based on 48 months yield data
  • The average yield of the Treasury Bills (the risk free rate) must also be exceeded by the expected yield from the stocks
  • The 10 year Australian bong yield has averaged 3.4% in the past 48 months

The targeted goal is to maximize the return

Using solver from the data ribbon (analysis)

The parameters are entered

The highest return, after solving for maximizing returns, the maximum return is found to be $ 3992 The maximum return is obtained from the figures shown in the table below;

LP

  • The amounts in $ to invest are shown below

 

 

Amounts to Invest in $

Max

3992

L

2150

M

3100

H

2150

V

2600


Interval Linear Programming (ILP)

  • The aim was to maximize returns
  • The constraints are as follows;
  • At least 2 stocks from R1 (the least risky) must be in the portfolio
  • At least 2 stocks from R4 (the most risky) must be in the portfolio
  • The target is to have a portfolio of 8 stocks
  • These were also solved using Solver in a spreadsheet after creating equations to satisfy the criteria
  • Applying solver to maximize the portfolio, the results below were obtained

V

38%

3800

L

32%

3200

M

16%

1600

H

14%

1400


Non Linear Programming (NLP)

  • Entails solving optimization problem using a system of constraints consisting of both equalities and inequalities
  • The results obtained are shown in the table below

NLP

Variance/Covariance Matrix

 

R1

R2

R3

R4

ASX

 

 

R1

 

 

 

-

 

 

 

0.0084%

0.1170%

-0.0115%

12.1000%

0.1500%

 

 

R2

0.1170%

2.3950%

7.8900%

0.0120%

0.2400%

 

 

R3

-0.0115%

7.8900%

0.0012%

0.0015%

0.1900%

 

 

R4

-12.1000%

0.0120%

0.0015%

0.0124%

0.1600%

 

 

ASX

0.1500%

0.2400%

0.1900%

0.1600%

2.1000%

 

 

 

 

 

0.00000

 

0.00000

Variance

0.0000000

Variance Terms

 

 

 

Std. Dev.

 

0.00000%

0.00000%

%

0.00000%

%

0.00%

 

 

 

 

 

 

Des. Ret

10.28%

Return Terms

0.00%

0.00%

3.04%

7.24%

0.00%

Return

10.28%

 
 

Discussion

The standard LP has the formula of the type minx cT x

Ax = b

X ≥ 0

The variables are split into independent and dependent The independent is set to zero and induced independent values are obtained

This method has the advantage of obtaining the optimum using the simplex interactions It is also easy to use and apply

The NLP method was more flexible, consistent with findings from research

However, developing the equations was a little of a challenge

Overall, it was a good method to use

The ILP model was by far the most challenging to use

It has internal consistencies

In choosing the best method for portfolio optimization, though, I would prefer the use of the linear model

While it is not very flexible, it is easy to obtain the optimum when using basic equations

Download Sample

Get 100% money back after download, simply upload your unique content* of similar no. of pages or more. We verify your content and once successfully verified 100% value credited to your wallet within 7 days.

Upload Unique Document

Document Under Evaluation

Get Credits into Your Wallet

*The content must not be available online or in our existing Database to qualify as unique.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Decision Models For Business Analytics. Retrieved from https://myassignmenthelp.com/free-samples/mis775-decision-models-for-business-analytics.

"Decision Models For Business Analytics." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/mis775-decision-models-for-business-analytics.

My Assignment Help (2020) Decision Models For Business Analytics [Online]. Available from: https://myassignmenthelp.com/free-samples/mis775-decision-models-for-business-analytics
[Accessed 10 July 2020].

My Assignment Help. 'Decision Models For Business Analytics' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/mis775-decision-models-for-business-analytics> accessed 10 July 2020.

My Assignment Help. Decision Models For Business Analytics [Internet]. My Assignment Help. 2020 [cited 10 July 2020]. Available from: https://myassignmenthelp.com/free-samples/mis775-decision-models-for-business-analytics.


Myassignmenthelp is a standout amongst other paper writing services as our prices at amazingly low and quality great. All our works go through multiple checks and audits before being rendered to students. We have domain specific experts all having PhD degrees and 10+ years of teaching experience. All the works provided are in line with the set regulations of the University. To avoid plagiarism issues, that has been a rage this year, our experts manually check all your references and ensure that it is according to the apa format, chicago format, mla format and other referencing styles that has been prescribed by University/College.

Latest It Write Up Samples

HI5019 Strategic Information Systems For Business And Enterprise 3

Download : 0 | Pages : 18

Answer: Introduction  Cybersecurity issues can have a direct influence on both business sakes as well as on the reputation of the business (Chhetri, Canedo and Al Faruque 2016). There are numerous Information Systems (IS) which are deployed across commercial establishments to optimize their business operations (Perlroth, Scott and Frenkel 2017). The role of the accountants of the system development projects is very much crucial to mainta...

Read More arrow Tags: Australia Brisbane 7 Strategic Information Systems for Business and Enterprise Holmes Institute 

ICT710 ICT Professional Practice And Ethics

Download : 0 | Pages : 13

Answer: Introduction Information and communications technology or ICT could be referred to as the extension term form information technology, which majorly focuses on the role of different unified communication and overall integration of the telecommunication or telephone lines and wireless signals or computers (Dutta, Geiger and Lanvin 2015, p. 1). Large economic incentives are required for merging different telephone networks with the respe...

Read More arrow Tags: Australia Rochedale 7 ict profesional practice and ethics University of the Sunshine Coast 

BUS5WB Data Warehousing And Big Data 2

Download : 0 | Pages : 2
  • Course Code: BUS5WB
  • University: La Trobe University
  • Country: Australia

Answer: Agile Data Warehouse Development Creation of data warehouse is multi quarter, monolithic and large effort subject to waterfall process. In modern age, that is no longer norm as several organizations are selecting to adopt more iterative and flexible design approach. With needs of business changing faster as well as new businesses requiring to adapt as well as leverage the inputs rapidly and concisely. Agile development approach is the...

Read More arrow Tags: Australia Bundoora 7 Data Warehousing and Big Data La Trobe University 

ITECH7401 Leadership In IT Project Management

Download : 0 | Pages : 3
  • Course Code: ITECH7401
  • University: Federation University
  • Country: Australia

Answer: Budget Estimate and Financial Analysis The Return on Investment (ROI) is 125.10%, which is higher than the required ROI of twenty-five per cent. Thus, the report concludes that this project will be beneficial Port Fairy Caravan and Camping Park Pty Ltd. Year 0 1 2 3 Total Inflows (Income) 0 90000 130000 150000 370000 Outflows (Expenses) -90000 -2000...

Read More arrow Tags: Australia Riverwood 7 Leadership in IT Project Management Federation University 

MAN6910 Business Process Management

Download : 0 | Pages : 5
  • Course Code: MAN6910
  • University: Edith Cowan University
  • Country: Australia

Answer: Issue register Name of issue Patient waiting too long to register Priority 2 Description When the patients visits the hospital, the new patients are required to be registered first for gaining the treatment in the hospital. Data and assumption Over 20% of the patients who are visiting the hospital are raising the issue of extensive waiting time and longer duration for which treatmen...

Read More arrow Tags: Australia Ashgrove 7 business process management Edith Cowan University 
Next
watch

Save Time & improve Grade

Just share Requriment and get customize Solution.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,359,015

Orders

4.9/5

Overall Rating

5,081

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 4/5

248 Order Completed

100% Response Time

Lloyd Bernabe

MSc in Accounting

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

440 Order Completed

99% Response Time

Jack Arens

MBA in HRM

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

1309 Order Completed

100% Response Time

Gemmie Chen

MSc in Nursing

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

798 Order Completed

97% Response Time

Benjamin Blakeman

MSc in Medical Technology

London, United Kingdom

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

Great work from expert! All good just missing one 1 reference, feedback and get it within a few hours.

flag

User Id: 254651 - 10 Jul 2020

Australia

student rating student rating student rating student rating student rating

Amazing work, thank you very much I have achieved amazing results. Thank you for your hard work

flag

User Id: 261191 - 10 Jul 2020

Australia

student rating student rating student rating student rating student rating

Really good work on the code. It ran perfectly and there were no mistakes in the code. All of the instructions were followed and there were no syntax errors at all.

flag

User Id: 457776 - 10 Jul 2020

Australia

student rating student rating student rating student rating student rating

very clear answers, full of information. The doctor was very happy with the answers. Thank you.

flag

User Id: 391476 - 10 Jul 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?