Wednesday, July 17, 2019
Solutions to Case the Harvard Management Company
The Harvard charge bon ton (2001) Case You testament design an excel spreadsheet that allows you to answer the following questions i) disposed(p) figures in viewings 4 and 11 what is the judge give-up the ghost and irritability of the policy portfolio? ii) Find an efficient portfolio having the homogeneous expected return as the policy portfolio but lower volatility. iii) Find an efficient portfolio having the same volatility as the policy portfolio but higher expected return. iv) Repeat question ii exploitation the tightents in Exhibit 13. ) Repeat question iii using the constraints in Exhibit 13. vi) Consider the following cardinal addition classes Domestic Equity, Foreign Equity, Emerging Markets, offstage Equity, Commodities, Inflation-Indexed Bonds, and Cash. Using HMCs input assumptions (see Exhibit 11, and alike using the constraints shown on Page 22, Exhibit 12), what would be the allocation across these seven security classes if HMC was face for optimal portfo lios that would have expected real returns of 4, 5, 6, 7, and 8%.For each of these lawsuits, also show the resulting standard refraction of the portfolio, and the Sharpe (efficiency) ratio (see footnote a in Exhibit 12). vii) Redo demote (vi) but now constrain the minimum and maximum weights on the seven distinguishable asset classes using the constraints shown in Exhibit 13. It may not be possible to achieve about of the expected real returns you were getting earlier. If that is the case, use louver expected real return levels that you can attain. iii) compare the investment opportunities implied by part (vi) to those in part (vii). ix) Explain the pros of the mean variance paradigm. x) Explain the cons. I will describe how to perform portfolio optimization in class. Excel is equipped with an optimizer (Solver) that requires you to specify what you are move to maximize or minimize, the variables (weights) that may be adjust in order to maximize portfolio efficiency, and the constraints imposed on those variables.The Harvard Management Company (2010) Case & Harvard Management Company Endowment Report (Sep 2009) xi) Policy portfolio reflects Harvard Management Companys asset allocation strategy. Compare Exhibit 4 of the 2001 case with that of the 2010 case describe how the policy portfolio has changed before and afterward the 2008 financial crisis. xii) What do you think are the reasons for the Harvard Management Company to make the above adjustments in asset allocation choices?