The Performance Of Portfolio Theory

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This report is established to illustrate the performance of portfolio by using modern portfolio theory to make one portfolio allocation decisions per year (round) over nine years (rounds) in an investment game and find out a reasonable strategy to meet a particular investment objective. Specifically, it tries to figure out following questions:
1. How the investment decisions can be made?
2. The research that is undertook
3. The critical factors that influenced the decision
4. How are the results different from our expectations?
The first question is more important since it plays a vital role in the investment process.

Some research papers have concluded several key points via using modern portfolio theory and we used them in
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That is to say, the manager can only get risk-free asset if he is willing to be in a relatively low risk level and he must give up monitoring how the return goes on as they only emphasis on risk and vice versa.

The second conclusion refers that some risky portfolios, to some extent, indicate a poor performance on a yearly basis. More specifically, there are still exist a phenomenon that it is inevitable that the return on a common stock will be negative although it performed better than bond in the long term according to the historical data. He also mention in the paper that the influence of asset on the portfolio could play an essential role in the making decisions on whether buying an asset or continuing to hold an asset. This result is embodied in the investment simulation system which is expressed by the yearly news.

In the third conclusion, Gruber argues that the characteristics of the investor determines the composition of the investor’s portfolio which also means that the investor must construct an appropriate portfolio in order to meet the client’s investment objectives. In addition, he also demonstrates that investment performance is supposed to be judged over a long period of time like more than one year so that the result to be received is going to be more accuracy and convinced. In other words, the long term performance data will give a brand new viewpoint in the case of constructing
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