David Varela

Global Minimum Variance Portfolio (GMV)

Investment Analysis

 

I did this work as part of my Investment Analysis class at American Univeristy. This project examines continuously compounded returns of a variety of assets. Using several excel applications, I created different portfolios at specified portfolio returns while minimizing risk (Standard Deviation). Moreover, this was replicated in two different scenarios: 

 

1. Restricted portfolio, disallowing short positions.

2. Unrestricted portfolio allowing short positions.

 

While examining these two scenarios, it is shown how diversification into short positions allows investors to reduce risk while obtaining a higher return for investments. Also, this exemplifies that a portfolio constituted of only long positions is restricted in terms of the risk and return for assets, where your maximum return will be investing 100% of your resources into one asset that, statistically, provides the highest return on a long only portfolio.