Honors Program Theses

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Open Access Honors Program Thesis

First Advisor

Ryan Flugum, Honors Thesis Advisor

Keywords

Portfolio management; Analysis of covariance;

Abstract

In this analysis, I investigate whether combining these two traditional methods of portfolio construction, mean-variance optimization and trend following, enhance the performance of a portfolio. Specifically, I consider whether stock trends within a pool of stock mechanically influences the covariance matrix for this pool of assets–a crucial input for mean-variance optimization. I then use these trend modified covariances to form a new mean-variance optimized portfolio and then evaluate performance. Instead of using the trends to determine whether or not to invest in a stock, as trend analysis postulates, I will be using trends to create new covariances between assets that better capture the essence of how two assets relate. These new covariances, instead of being only historically based, will be based on historic covariance only in days which match the prevailing trend of each asset. The results of this investigation will bring about more understanding of optimal portfolios and the factors that affect their creation.

Year of Submission

2021

Department

Department of Finance

University Honors Designation

A thesis submitted in partial fulfillment of the requirements for the designation University Honors

Date Original

5-2021

Object Description

1 PDF file (20 pages)

Language

en

File Format

application/pdf

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