# Use your rules and models/methods to dynamically assign optimal port- folio weights during the…

Student needs to do only one part of the question which is 4(a) and 4(b)

The attached assignment is also sent. Additionally, the chinese document has a student copy of the assignment done last year which is similar. Experts needs to only do section 5 which relates to the 4a and 4b located on pages 31-38. So expert needs to set up approximately a 7-8 page report.

Student will send a Matlab file that has the codes of the rules. Student advised expert needs to pick only one rule or can come up with their own rules. Also the data is located in that Matlab file.

4.a) Use your rules to choose a set of fixed portfolio weights, using in-sample data.?

(b) Use your rules and models/methods to dynamically assign optimal port- folio weights during the forecast sample period (i.e. do this for each combination of rule and method/model). Justify your frequency of optimally choosing portfolio weights; use at least two different frequencies of changing weights (e.g. every period, every 5th period). Under each choice you must ‘update’ the portfolio weights at least 5 times in the forecast sample. Also justify how often model parameters are re-estimated (a separate decision).

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The University of Sydney Business

School

Business Analytics

QBUS6830: Financial Time Series and Forecasting

Semester 1, 2014

Assignment 2

To be completed in groups of 3-4 students

Due Date: Wednesday 4th June, by 5pm; via online Turnitin submission.

The goal of this assignment is to compare a range of models/methods for forecast-

ing, in the context of a dynamic portfolio allocation problem, regarding investment

performance; i.e. you will use forecasts from di?erent methods/models to dynamically

set optimal asset portfolios, using di?erent rules. The overall goal is to assess and

compare these competing models and methods for investment purposes, including for

risk management. Please see the Guidelines document in addition to the following

minimum requirements:

Mimimum Requirements (not in order)

1. Motivate your choice of assets and your chosen sample of data (e.g. data fre-

quency and sample size). Separate your data into in-sample and forecast period

samples. Present a su?cient and relevant exploratory data analysis that illus-

trates the properties of the in-sample data.

2. Asset portfolio returns are given by the weighted sum of the individual asset re-

turns. Motivate, thenclearlypresent atleastthree(3) di?erent rulesormethods

forchoosing ’optimal’ portfolioweights foruse inyour study. Clearly justify your

choices. At least one of these methods must involve the concept of risk manage-

ment, using a quantitative risk measure appropriate for these asset portfolios to

choose portfolio weights. You can be creative with your choices, but you must

clearly justify each choice you make.

3. Motivate and discuss the quantitative models for asset returns that you will

employ. You should choose at least (3) di?erent models/methods here. At

least one of these must be a GARCH-type parametric model, while the others

can be naive, adhoc, non-parametric, etc. Include any tests and (brie?y) any

diagnostics you applied to choose or adapt/re?ne these models.

4. (a) Use your…

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