Choosing a Source of Finance

Jun 27th, 2015
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Academy of Art University
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In Case-1 , Short selling the Dal provided additional cash which can be used to invest in the high return stock (LUV or UTX) in the long position . When short sell constraint was removed, the additional cash is no more available, hence the return in case-2 is less than the return in case-1.

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1. We maximized the Sharp ratio by utilizing Solver to manipulate the weights of each stock in the portfolio subject to the constraint that the weights of all three stocks add to 100%. The maximum ratio was 1.107 and the weights for UTX, DAL, and LUV were 78%, -59%, and 81% respectively. This resulted in a portfolio mean of 42.4% with a standard deviation of 34.7%.2. We maximized the Sharp ratio by utilizing Solver to manipulate the weights of each stock in the portfolio subject to the constraint that the weights of all three stocks add to 100%, and the constraint that no stocks weight

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