Date of Graduation

5-2016

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor

Rennie, Craig

Reader

Santamaria, Sergio

Abstract

This paper investigates whether portfolio managers can outperform the S&P 500 index using top-down asset allocation, using historical returns, standard deviations, and correlations of different asset classes. Efficient diversification between asset classes reduces the idiosyncratic risk by selecting assets from a wide variety of different classes of assets in different parts of the world. The goal is to create an optimization model that makes it possible for a portfolio manager to generate higher expected returns, while taking risk equal to that of the S&P 500, or incur lower risk while generating the same expected return of the S&P 500.

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