Reference no: EM133074804

1. Your client has $100,000 and an investment horizon of 10 years, they've hired your consulting firm to recommend a diversified portfolio consisting of at least 5 securities (stocks, bonds, ETFs, etc.) that produce the optimal risk/return relationship (i.e., the highest Sharpe Ratio). Report the optimal, min variance, and max return portfolios for your 5 securities. Estimate your portfolio statistics using at least 10 years of monthly data. Do not include any assets that don't have at least 10 years of monthly data.

2. Interpret the portfolios for your client: Did they outperform or underperform the S&P500 over the time period in terms of Sharpe Ratio, average (GEOMEAN) return, Sortino ratio, maximum drawdown, and overall portfolio growth? Explain the pros and cons of each of the three portfolios and how your client's risk tolerance would come into play. What concerns would you have about your client using this portfolio as their retirement portfolio? (hints: what assumptions does the mean/variance portfolio theory make?; what is the mean/variance portfolio not taking into consideration?)