Ideal Portfolio Allocations Maximizing Sharpe Ratios

Date

2024-05-02

Authors

Brown, Aaron

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Abstract

In finance, the main goal is finding the most appropriate use of funds for a given purpose to grow the value over time with the appropriate allocation of resources to achieve their specific goals most efficiently. What is essential to understand from this aspect for the people who manage personal funds, namely, money managers, is where to invest their client's money to maximize returns and lower risk. The portfolio manager is responsible for determining portfolio allocation that aligns with their clients' return and risk requirements. In this context, the optimal portfolio is the one that achieves maximum returns while adhering to the client's specified risk tolerance. A crucial aspect of financial management involves comprehending shifts in portfolio allocations and their underlying causes. Such insight not only enhances decision-making but also serves as a valuable predictor of potential future ideal portfolios, including the assets they comprise and their respective weights.

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Finance

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