💾 Download Free Excel File: ► Grab the file from this video here: ryanoconnellfinance.com/product/efficient-frontier-and-capital-allocation-line-excel-file/ 🎓 Tutor With Me: 1-On-1 Video Call Sessions Available ► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/
@connie7419
6 ай бұрын
thank you so much for your video Ryan!!! that's a perfect explanation!
@RyanOConnellCFA
3 ай бұрын
You're very welcome! Thanks for letting me know
@cuad0130
5 ай бұрын
Hello, amazing video thank you! Just a quick question, how come for covariance you use the "Covariance.P" and not "Covariance.S" since we are using a sample of historical returns and not the total (population) amount?
@satyapal18
10 ай бұрын
Thank you so much for the explanation Ryan, you have solved my biggest query. I am currently reading Simon Binnega's books financial modeling. This video has actually presented entire chapter no 8. I have no words to describe my emotions. Lastly I wants to know that could you explain what capital allocation line explain? I mean what it is trying to say investor?
@RyanOConnellCFA
10 ай бұрын
Glad it was that helpful! It is amazing how much textbook info you can cover more efficiently in a video The capital allocation line represents a portfolio's risk versus expected return. It illustrates the risk-reward ratio for a given portfolio, combining risk-free assets with a portfolio of risky assets. If you move above the tangential point where it touches the efficient frontier, that means you are starting to short the risk free asset and invest more than 100% of your portfolio into the optimal risky portfolio. Essentially, it guides investors on how to maximize returns for a given level of risk through diversification.
@satyapal18
10 ай бұрын
@@RyanOConnellCFA Sir, thank you so much for your contents and clarity. Your videos are helping me to grasp the concepts from the book. 🙂 I wish I would have seen your videos 10 years ago. Thank you so much sir.
@jasonl1887
Жыл бұрын
Perfect, I downloaded the excel spreadsheet and noticed in the video the sharpe ratio was different. This is just because the risk-free rate was not locked with F4 if anyone also wondering what is different, cheers Ryan! This has helped me a lot with my financial understanding.
@RyanOConnellCFA
Жыл бұрын
Glad it helped! Thank you for the feedback Jason. Not locking that risk free rate is the one regret that still haunts me with this video haha
@faridsalehi7275
9 ай бұрын
Would you please send me the file
@RyanOConnellCFA
2 ай бұрын
@@faridsalehi7275 You can download the file for free here: ryanoconnellfinance.com/product/efficient-frontier-and-capital-allocation-line-excel-file/
@akshaydamani
2 жыл бұрын
Hi Ryan, just wanted to ask, should we lock the Risk free asset while computing the Sharpe ratio formula
@RyanOConnellCFA
2 жыл бұрын
Yes! That is the one part of this video I messed up :(
@divypatel3677
7 ай бұрын
why we have not use "ln" to cal. the returns like in other times ..?
@RyanOConnellCFA
7 ай бұрын
I was trying to keep the video simpler. Ln would be the more accurate way to calculate the returns in my opinion. For anyone curious, you can see this methodology of calculating returns using =ln() for the efficient frontier here: kzitem.info/news/bejne/on2g2aqafX-qm3o
@chitsai_
Жыл бұрын
Thank you!
@RyanOConnellCFA
Жыл бұрын
My pleasure!
@antsos
Ай бұрын
Hi, why do we use 0,100 and 200% CAL? Can someone please explain this?
@kevinlaffey9310
Жыл бұрын
What are your thoughts on using the natural log of returns (LN(Cl/Cl-1)) as opposed to simple returns? Much of the literature recommends using log returns. There will be distortions at large values both positive and negative however. Thanks!
@RyanOConnellCFA
Жыл бұрын
I would recommend using the natural log of returns! In fact, I I have a new video out now using this method: kzitem.info/news/bejne/on2g2aqafX-qm3o
@kevinlaffey9310
Жыл бұрын
@@RyanOConnellCFA Thank you Ryan. That sounds great. I did some research on my own as well. The consensus among the quant community, which I realise you are a part and hence already know but sharing here for others’ reference, is that owing to the asymmetric behaviour of simple returns, natural log returns which behave symmetrically should be used whenever the focus of interest is on the temporal behaviour of return. So this would include for metrics such as volatility, beta, correlation and VaR. All predictive measures as natural log returns are time additive, essentially representing a continuously compounded rate. Meanwhile, the asset additive simple (linear) returns are recommended to be used for performance measurement and attribution, basic risk analysis and portfolio optimisation. This would seem to imply to me that, for example, the simple returns of each asset in a portfolio should be used to calculate portfolio standard deviation as it is against those actual returns the actual weights of each asset in the portfolio must be multiplied against. Would you agree? I guess this also means that if one is interested in calculating portfolio beta (and the metrics of which it is composed) to a benchmark, perhaps for hedging purposes, then one would need to use natural log returns. Very interesting stuff I’m sure you’d agree! I presume this is why there’s so much commercially offered investment and portfolio analysis software out there as the multitude of steps one must take with handling the raw time price series data is substantial. But there’s clearly a great deal of satisfaction in doing it oneself with Excel or Python, etc, and actually knowing the approaches being used by the fancy software. I actually found two good academic research papers related to this topic. If you like I can send to you if you have a preferred contact method. Just let me know, here or on Twitter (@KevinLaffey3) or LinkedIn. Another thing I was exploring which I’ve had some success with is how to calculate the cross asset correlation within a portfolio to gauge the actual diversification benefits being achieved by the portfolio composition and weights. What I found there is that the basic approach mirrors the method employed by the CBOE for its implied correlation indices. But Goldman quants actually figured out a bit of a shortcut which a user on stack quant exchange was good enough to share. So I have info on that too if you’d like in case you may not have seen it. Cheers and thanks again
@austinbrown2726
Жыл бұрын
@@RyanOConnellCFA link? :)
@RyanOConnellCFA
Жыл бұрын
@@austinbrown2726 Here is the link to the new efficient frontier video! kzitem.info/news/bejne/on2g2aqafX-qm3o
@RyanOConnellCFA
Жыл бұрын
@@kevinlaffey9310 Really fascinating Kevin! I would love to see that paper if you wouldn't mind sending it to me on LinkedIn. I recently was facing the same dilemma you mentioned in choosing whether to use log returns or simple returns for a client's project related to portfolio performance attribution. I ultimately ended going with simple returns for the reasons that you mentioned above. I also made a video breaking down simple vs log returns which I'd very very interested in getting your thoughts on since you understand the topic so deeply: kzitem.info/news/bejne/x6qOvmikk3xlo6A
@koroshk5748
Жыл бұрын
Beautiful
@RyanOConnellCFA
Жыл бұрын
Thank you!
@faridsalehi7275
9 ай бұрын
Hi dear Ryan, how can I rotate a straight line ( capital allocation line without adding data)in Excel relative to a point?
@RyanOConnellCFA
9 ай бұрын
Hello, I'm not sure why you would want to rotate the CAL line. It is the point of tangency between the risk free rate and the optimal portfolio. It would rotate if either of those changed
@priyankmaru823
3 жыл бұрын
Hi buddy, I think there is error in Sharpe ratio, Risk free rate is not freezes, you must freez that too. Kindly check it.
@RyanOConnellCFA
3 жыл бұрын
Absolutely, I've corrected that in the downloadable file! And I've tested that if the cell is frozen, the same portfolio still has the highest Sharpe Ratio. Thank you for your comment!
@billqin7869
3 жыл бұрын
Hello, Ryan. Your videos are quiet useful! But the download file is missing. The only problem I don't understand is how to create the formula to capture the optimal portfolio. Could you upload this file again? Thank u so much:)
@RyanOConnellCFA
3 жыл бұрын
Thank you for the feedback Bill! It should be fixed now. Please let me know if you have any other problems 💾 Download the file created in this video free here: ryanoconnellcfa.com/product/efficient-frontier-and-capital-allocation-line-excel-file/
@antonzharkov6036
2 жыл бұрын
great video about the efficient frontier, how would the calculation change if you add 1more stock to the portfolio?
@RyanOConnellCFA
2 жыл бұрын
Hello Anton, you could do it mostly the same way as a showed in this video. The big difference is that you'd need to make a correlation matrix to measure portfolio standard deviation. I show how to do that in this video: kzitem.info/news/bejne/lbCBz6SXh3OfgoI
@muktanaik822
2 жыл бұрын
Hey amazing content. Why not use the function stdev.s for standard deviation?
@fredve3984
Жыл бұрын
Thats what I use and I think it's more correct. He's using the population SD when, in fact, he doesn't have the entire population of data.
@shiyaohong2728
Жыл бұрын
very usefulllllll!!!!!!!!!!!!!!!!!!!-A student from IMPERIAL COLLEGE BUSINESS SCHOOL
@RyanOConnellCFA
Жыл бұрын
Thank you and hello from the US!
@mcpeinventors6094
3 жыл бұрын
I found this channel a week ago, and absolutely love it. Keep em coming Ryan!
@RyanOConnellCFA
3 жыл бұрын
Your comment will give me good motivation to keep them coming! I really appreciate the feedback
@SaheliChakraborty-h1h
5 күн бұрын
I am watching from India and this is the best process and detailed evaluation.... I have seen everafter ❤
@RyanOConnellCFA
5 күн бұрын
Thank you for letting me know Saheli!
@Zenttt0098
Жыл бұрын
how to know the risk free rate for 12 month in 1 year? and is correlation is same as risk free rate?
@RyanOConnellCFA
Жыл бұрын
Sound likes you are looking for the 1 year forward risk free rate starting 1 year from today. You could calculate that using the approach I show in this video: kzitem.info/news/bejne/u4V4y5xjrqZ9h3o Correlation is not the same as the risk free rate
@jmnew3463
Жыл бұрын
Great Video It helped a lot! One single question: Where du you take the risk free interest rate from ? Current 3m, 2y or 10y US treasury bond yield ?
@RyanOConnellCFA
Жыл бұрын
3-month Treasury Bill is the most frequently used term for the risk-free rate in portfolio optimization, as it represents a short-term investment with virtually no risk. It is often used in the context of short-term trading strategies and tactical asset allocation.
@jmnew3463
Жыл бұрын
@@RyanOConnellCFA Thanks. So when we are looking at daily returns from the stock market - let's say over the last 10 years - we calculate our (expected) return and volatility on basis of these returns and then in the last step we divide the yield of the 3-m treasury by 252 to get our risk free interest rate ?
@RyanOConnellCFA
Жыл бұрын
@@jmnew3463 If you are looking at daily returns for the stocks then you want to make sure that you are also going by daily returns for the treasury. Although it may make more sense to annualize them and then make calculations based on annual returns and volatility
@massoudbayati7571
2 ай бұрын
Thanks. great. Could you please provide training for multiple-asset portfolio rather than two asset.
@RyanOConnellCFA
2 ай бұрын
Hello, you can find my video on the efficient frontier for portfolios with more than two assets here: kzitem.info/news/bejne/on2g2aqafX-qm3o
@financialchimes4546
7 ай бұрын
Should you use the geometric mean or the simple average? And why? The geometric mean would be a more realistic long term return.
@RyanOConnellCFA
7 ай бұрын
You are correct, I would recommend to use the geometric mean. Although, it won't be a material difference it will be slightly more accurate
@marvellousproductions8992
2 жыл бұрын
Hey Ryan, thanks so much for sharing it is really helpful ! I have one question though, as I can see the intercept on the y axis is not with the value of your risk free asset. When I tried to plot mine, I get a small graph of the frontier and a a really large line. This is I guess because my risk free rate is really small so it produces a really unbalanced graph that is not readable without extremely enlarging it. I just wanted to ask if you did any other steps before in tour settings or something in order to get such a visible graph. Thank you:)
@RyanOConnellCFA
2 жыл бұрын
It is my pleasure! Without actually seeing your file, it is very difficult for me to figure out what the issue is. It could be that your risk free rate is just so low that it looks like it starts at the bottom left corner but it could also be that your horizontal axis settings are cutting off some of the capital allocation line. Try downloading my file using the link in the description and taking a look at the chart settings
@morales_jason355
7 ай бұрын
for the Portfolio sharpe ratio u didn’t lock in the risk free rate. should we be cell locking that?
@RyanOConnellCFA
7 ай бұрын
Good catch! You should absolutely be locking that cell
@stefanosmiltiadou9272
10 ай бұрын
Why do you choose population variance formula insted of sample population formula?
@RyanOConnellCFA
10 ай бұрын
In hindsight I'd have chosen sample variance because this is truly a sample of the stocks total population of returns. However, neither choice will make much of a difference in samples of this size
@amaniojo4164
Жыл бұрын
I FIND YOUR VIDEO REALLY HELPFUL BUT I HAVE ANOTHER QUESTION THAT I HAVE NOT SEEN IN YOUR VIDEOS. You require that your portfolio yields an expected return of 14%, and that it be efficient on the best feasible CAL. i. What is the standard deviation of your portfolio? ii. What is the proportion invested in the T-bill fund and each of the two RISKY FUNDS
@amaniojo4164
Жыл бұрын
PLS CAN YOU GUIDE ME ON HOW TO DO THIS. THANK YOU
@RyanOConnellCFA
Жыл бұрын
In the optimal portfolio indicated by the orange dot, we are putting 100% of our money into the optimal portfolio, and 0% in T-bills. The proportions to the risky assets are shown by the yellow highlighted line. 70% SPY, 30% VXUS. Standard dev is 0.92%
@bambinoskebabs2278
Жыл бұрын
does everything compute the same if we use annualized return and sd figures?
@RyanOConnellCFA
Жыл бұрын
Yes, as long as you annualize it the correct way, it will compute the same. This video goes into depth on how to annualize standard deviation and expected return properly: kzitem.info/news/bejne/tXyu0ZN5sn1nmm0
@tamnguyenlequynh6335
Жыл бұрын
I dont know why we have 200% in weights, please explain it for me
@RyanOConnellCFA
Жыл бұрын
The 200% indicates that we are going short the risk free rate 100% and investing that money that we borrowed into the risky portfolio. So lets say that we have $10,000 hypothetically. We then borrow an additional $10,000 and pay the risk free rate of interest to do so. We then take both our initial $10,000 and then additional $10,000 that we are borrowing, and invest the total $20,000 into the risky portfolio.
@justsomeone_rd
Жыл бұрын
hy ryan how if we have 10 asset? how to make efficient frontier curve?
@RyanOConnellCFA
Жыл бұрын
My new Efficient Frontier video on portfolios with more than 2 assets can be found here: kzitem.info/news/bejne/on2g2aqafX-qm3o
@kylekelley3226
5 ай бұрын
Great video, super easy to follow. Ran into an inconvenience. When importing data from yahoo finance, it downloads furthest date first. Is there a way to download in descending order instead of ascending? I don't think this affected results at all, it's just something that is bugging me. Anyone have any tips for this?
@falinoluiz5962
Жыл бұрын
What if I have 30 securities in my portfolio?
@RyanOConnellCFA
Жыл бұрын
You'd follow a similar process. The daily returns would be easy to calculate with a weighted average. But the standard deviation would be difficult as you'd have to create a correlation matrix as I do in this video: kzitem.info/news/bejne/lbCBz6SXh3OfgoI
@williamrivera162
3 жыл бұрын
Hi Ryan. I saw several videos, but I consider that your video is one of the best. Good explanation and easy to understand. Congrats go ahead.
@RyanOConnellCFA
3 жыл бұрын
Thank you, William, I appreciate the feedback! I guess practice makes perfect haha
@iam-drake
5 ай бұрын
using 2% for the risk free rate, what about calculating for 6 different asset while using daily returns??.
@martincontreras6031
2 ай бұрын
awesome!! where do can I deposit few bucks to support your channel?
@RyanOConnellCFA
2 ай бұрын
Hey Martin, that is very nice of you to offer! The easiest way is to go to this page on my website and buy a file of your interest: ryanoconnellfinance.com/financial-models/ I really appreciate the support!
@martincontreras6031
2 ай бұрын
@@RyanOConnellCFA will do. A word of advice regarding autocorrect when typing… don’t use it. I didn’t proofread my comment, hence, the outcome 😅.
@RyanOConnellCFA
2 ай бұрын
@@martincontreras6031 Haha thank you for that! Sticking to a computer rather than a smart phone helps with these type of issues!
@mustardwithglasses6508
6 ай бұрын
How are you getting the VXUS numbers? I don't see it anywhere in the data sheet?
@thutanaing2024
Жыл бұрын
Hello.., how about constructing Efficient Frontier on 3 Different Assets??
@RyanOConnellCFA
Жыл бұрын
I got you covered right here! kzitem.info/news/bejne/on2g2aqafX-qm3o
@thutanaing2024
Жыл бұрын
Thank u sir, coz i am doing MBA Thesis on Portfolio Construction, thz for ur kindness @@RyanOConnellCFA
@RyanOConnellCFA
Жыл бұрын
@@thutanaing2024 It is my pleasure, good luck with your thesis and I hope my videos can be of some help to you! You may want to check out my video on portfolio optimization as well: kzitem.info/news/bejne/on2g2aqafX-qm3o
@jesperhjort6909
2 жыл бұрын
Hey. Great video. One question though. Why not use the solver to find the optimal portfolio allocation? It seems like you randomly pick the portfolio weights and then just assume that the best allocation in your sample by definition is the optimal portfolio.
@RyanOConnellCFA
2 жыл бұрын
Jesper, the solver would give you an even more accurate result. I have another video on that topic here: kzitem.info/news/bejne/lbCBz6SXh3OfgoI
@anasmerini9486
3 ай бұрын
You didn't lock the risk-free rate cell in the Sharpe ratio calculation at 5:27
@faridsalehi7275
9 ай бұрын
Anyone send me the file in this video, please.
@RyanOConnellCFA
9 ай бұрын
You can download that here: ryanoconnellfinance.com/product/efficient-frontier-and-capital-allocation-line-excel-file/
@ishmailsannoh2486
2 жыл бұрын
Best video I have watched so far. So well explained and easy to understand. Keep it up
@RyanOConnellCFA
2 жыл бұрын
Awesome, thank you!
@chadieltahan7436
Жыл бұрын
Many thanks Ryan for the informative content! I am CFA level I candidate and just studying this material in Portfolio Management. I am also planning to take a financial modelling course between level l and level ll. Any specific course you recommend? And what could be the specific job titles that are mainly focused on creating financial models such as this one? Thanks again.
@RyanOConnellCFA
Жыл бұрын
Hello! I'm not certain of the best financial modeling course to take. But as far as jobs that use skills such as the one I created in this video, you could search on job boards for the titles: Financial Analyst Investment Banker Private Equity Analyst Corporate Finance Analyst Quantitative Analyst Risk Manager Portfolio Manager Financial Planning and Analysis (FP&A) Analyst Venture Capitalist Real Estate Analyst Credit Analyst Mergers and Acquisitions (M&A) Analyst Derivatives Analyst Fixed Income Analyst Hedge Fund Analyst
@Michael-qj4hg
18 күн бұрын
Thanks Ryan! Just found this and it really helped with my Investment class.
@RyanOConnellCFA
5 күн бұрын
I'm very glad to hear that!
@sh2957
5 ай бұрын
05:32 i think you didn't lock 'I7' (risk free rate)
@sheilaharty3167
2 жыл бұрын
good video thanks but you forgot to lock in your rfr cells a couple of times
@JKInvestments
Жыл бұрын
Nice video. Explained clearly in easy to understand language.
@RyanOConnellCFA
Жыл бұрын
Thanks for the positive feedback!
@alejadroigoyanes
2 жыл бұрын
please do this but with like 10 assets
@RyanOConnellCFA
2 жыл бұрын
I will look into this in the future, thank you for the suggestion
@bobbybaylonjr7403
2 жыл бұрын
Great video. Thank you. Is it ok for you to share the file? It can't be downloaded! Please keep on recording videos like this.
@RyanOConnellCFA
2 жыл бұрын
Hello Bobby, please take a look at the description. I re-posted the file with a link to Github
@光明黑暗-p2w
Жыл бұрын
hi, for the risk free rate if i count for 10 years should it be 0.02/3600?
@RyanOConnellCFA
Жыл бұрын
No, you would likely take the 10 year risk free rate (perhaps the 10 year Treasury Note rate as an example) and then divide it by the number of trading days in the year (252) to get the daily risk free rate of return
@ChuAnhThu-oq2xl
Жыл бұрын
why do you allocate weight of CAL to 200% ? Thank you for your helpful video 🥰
@RyanOConnellCFA
Жыл бұрын
The 200% indicates that we are going short the risk free rate 100% and investing that money that we borrowed into the risky portfolio. So lets say that we have $10,000 hypothetically. We then borrow an additional $10,000 and pay the risk free rate of interest to do so. We then take both our initial $10,000 and then additional $10,000 that we are borrowing, and invest the total $20,000 into the risky portfolio.
@ivan_leung_aus
Жыл бұрын
Thank you very much for putting this up. Much appreciated
@RyanOConnellCFA
Жыл бұрын
My pleasure Ivan!
@ChuAnhThu-oq2xl
Жыл бұрын
why do you allocate weight of CAL to 200% ? Thank you for your helpful video 🥰
@RyanOConnellCFA
Жыл бұрын
The 200% indicates that we are going short the risk free rate 100% and investing that money that we borrowed into the risky portfolio. So lets say that we have $10,000 hypothetically. We then borrow an additional $10,000 and pay the risk free rate of interest to do so. We then take both our initial $10,000 and then additional $10,000 that we are borrowing, and invest the total $20,000 into the risky portfolio.
@simonpark6885
11 ай бұрын
Hi, how do you find the tangency portfolio with two assets and how do you find the weights for the two assets
@RyanOConnellCFA
11 ай бұрын
You can use the Excel solver to answer this question. I have made a video more recently with 3 assets showing how to do this: kzitem.info/news/bejne/on2g2aqafX-qm3o
@Analyst101
Жыл бұрын
Just one thing, for the sharp ratio, you didnt lock the Rfr there for it took 0% for every other data row.
@RyanOConnellCFA
Жыл бұрын
Yup, good catch! This is fixed in the downloadable file
@kokomisangonomiya5154
3 жыл бұрын
i tried downloading your file, but it doesnt seem to work. It says Page Not Found (404)
@RyanOConnellCFA
3 жыл бұрын
I appreciate you letting me know. I just fixed this error and the file should be available for free download. Please let me know if it works for you
@josealejandroandraderodrig3123
5 ай бұрын
This is awesome Ryan, its very intuitive explanation, just a question, am I wrong or you made a mistake to not lock the risk free rate cell in the Sharpe ratio formula? and also for the return calculation of the CAL?
@izzatimalek
2 жыл бұрын
ryan. i cannot download the file. its missing. btw thank you for the knowledge!
@RyanOConnellCFA
2 жыл бұрын
Just updated with a Github link!
@muhammadilman8195
10 ай бұрын
yoo, thanks for the video. your explanation helped me on the efficient frontier graph for my assignment.
@RyanOConnellCFA
10 ай бұрын
Great to hear!
@SA-ft4gu
9 ай бұрын
I didn't get the tangent line on the graph, it only shows the orange fot of the optimal portfolio
@RyanOConnellCFA
9 ай бұрын
It is difficult for me to tell what is going wrong from this comment. You may need to follow the steps once again
@parkerjones6402
2 жыл бұрын
Thanks for the video very helpful. How would you calculate the covariance on a 3 stocks?
@RyanOConnellCFA
2 жыл бұрын
You're welcome Parker! Check out this video where I make a covariance matrix on a 4 stock portfolio: kzitem.info/news/bejne/lbCBz6SXh3OfgoI
@behnamhoseinnezhad7080
2 жыл бұрын
What is the OPTIMAL PORTFOLIO formula in the RETURN line?
@RyanOConnellCFA
2 жыл бұрын
The portfolio with the highest Sharpe ratio
@sahyjuf1603
Жыл бұрын
Great explanation and easy to understand! Thank you!
@RyanOConnellCFA
Жыл бұрын
You are welcome!
@matheusgomes4592
2 жыл бұрын
Hello Ryan, thank you so much. I'm from Brazil and you helped me a lot! Tks :)
@RyanOConnellCFA
2 жыл бұрын
Glad you enjoyed it and thanks for the feedback Matheus!
@stephanwagner4578
2 жыл бұрын
Hi Ryan, i have never come across sharpe ratio in per cent. How is that to be interpreted? Thanks a million in advance
@RyanOConnellCFA
2 жыл бұрын
Stephan, you could just change it to decimal form instead of percentage if you prefer. It shouldn't change the outcome
@goodlyboony
2 жыл бұрын
You forgot to $ the risk free rate for the sharp ratio. The calculation aren't accurate
@RyanOConnellCFA
2 жыл бұрын
Good catch. The file in the description available for download has that cell locked. I'd recommend people to look over that file
@Dongnanjie
9 ай бұрын
The risk-free rate was not locked (F4) in the video.
@RyanOConnellCFA
9 ай бұрын
Good catch! I've got it fixed in the downloadable file
@TimothyMbuga
Жыл бұрын
Ryan O'Connell i really need your guidance, i've got a uni assignment in modern portfolio theory.
@RyanOConnellCFA
Жыл бұрын
Hey Timothy, what is the hold up?
@timtio3373
Жыл бұрын
@@RyanOConnellCFA is it possible to share with you the assignment via email?
@ظافرعبدالله-د6د
3 ай бұрын
Great
@RyanOConnellCFA
3 ай бұрын
Thank you!
@AndreaMcNair
7 ай бұрын
thanks so much for this video! I needed this for my Investments class!
@RyanOConnellCFA
7 ай бұрын
Its my pleasure! Really glad it helped
@lucagiussani7109
2 жыл бұрын
Great video Ryan! Can you do it with a 10 assets portfolio? How to set the weights? Thank you
@RyanOConnellCFA
2 жыл бұрын
Luca, I've been thinking about revisiting this video with a larger portfolio. I likely will be it won't be for a while
@zarpasuave
Жыл бұрын
BLESS YOU FOR SHOWING HOW TO GRAPH THE LINE YOURE SUPER DOPE THANK U THANK U
@RyanOConnellCFA
Жыл бұрын
My pleasure Nuria!
@Rasamandrice
2 жыл бұрын
Really cool content man! I tweaked this slightly and used the Excel Solver to find the optimal weights.
@RyanOConnellCFA
2 жыл бұрын
Thanks Vignesh! How do you tweak the Excel Solver?
@elaheabdolahi1878
Жыл бұрын
Thank you so much Rayan! Your video helped a lot
@RyanOConnellCFA
Жыл бұрын
Glad it helped!
@jmnew3463
Жыл бұрын
In the Literature i found, they call the tangential portfolio the point, where the CML (not CAL) tangents the efficient frontier. Why did you choose to call it CAL?
@RyanOConnellCFA
Жыл бұрын
Hello JM New, it is possible that the literature you're referring to is misleading. I hope this helpson the differences between the CAL and CML: The Capital Allocation Line (CAL) and the Capital Market Line (CML) are both concepts used in portfolio theory, but they serve different purposes and have different characteristics. Here's an overview of each: Capital Allocation Line (CAL): The CAL represents the risk-return trade-off for different combinations of a risk-free asset and a risky portfolio. It's a graphical representation of a linear relationship between expected returns and risk (as measured by standard deviation) for various portfolios that include both a risk-free asset, like a government bond, and a risky portfolio, such as stocks. The CAL has the following properties: The y-intercept of the CAL represents the risk-free rate of return. The slope of the CAL, known as the Sharpe ratio, measures the risk-adjusted performance of the risky portfolio. A higher slope indicates a better risk-return trade-off. An investor can choose any point along the CAL, depending on their risk tolerance and desired returns. By adjusting the weights of the risk-free asset and the risky portfolio, investors can create their optimal portfolio based on personal preferences. Capital Market Line (CML): The CML, on the other hand, is a specific case of the CAL. It represents the risk-return trade-off when the risky portfolio is the market portfolio, which consists of all risky assets in the market. The market portfolio is assumed to be the most diversified and efficient risky portfolio available, as it lies on the efficient frontier in the Markowitz's Modern Portfolio Theory. The CML has the following properties: Like the CAL, the y-intercept of the CML represents the risk-free rate of return. The slope
@jmnew3463
Жыл бұрын
@@RyanOConnellCFA Thank you for you detailed anwser! I did a little bit more research and think that this is the correct answer: The CAL actually includes the individuall preferences of the investor, but if we assume Investors with risk same preferences then we have CAL=CML. Because in the scientific literature I found, the tangency point of CML and efficient frontier is the portfolio with the highest Sharpe ratio which means that this is the tangential portfolio = global market portfolio
@RyanOConnellCFA
Жыл бұрын
@@jmnew3463 Really interesting point! Thank you for coming back and sharing. I'm sure your comment will help people that visit this video in the future!
@amanda-ellesbethneemia3959
2 жыл бұрын
This is a really great video and very easy to follow-thanks for posting. I'm having trouble though creating the formula to capture the optimal portfolio, can you reshare the link to the spreadsheet :)
@RyanOConnellCFA
2 жыл бұрын
💾 Download the file created in this video free here: ryanoconnellcfa.com/product/efficient-frontier-and-capital-allocation-line-excel-file/
@muratgelir
2 жыл бұрын
This video answered all of my questions than youu
@RyanOConnellCFA
2 жыл бұрын
My pleasure Murat
@mohammadvarchandi1574
Жыл бұрын
Thanks, Gentleman for your useful videos
@RyanOConnellCFA
Жыл бұрын
My pleasure!
@agustinamenabar4554
2 жыл бұрын
Very usefull man! Greetings from Chile
@RyanOConnellCFA
2 жыл бұрын
Thank you and greetings from the USA!
@StefanieWu-w5z
Жыл бұрын
should lock the cell referencing "risk free rate"
@RyanOConnellCFA
Жыл бұрын
You are correct Stephanie, this error is fixed in the free download file in the description
@ChintavCBD
10 ай бұрын
thanks brother
@RyanOConnellCFA
10 ай бұрын
My pleasure!
@anastasioskondo9186
2 жыл бұрын
you're a good guy brother! thanks for the help
@RyanOConnellCFA
2 жыл бұрын
Much appreciated my friend!
@minhhangpham6649
2 жыл бұрын
can you do for the three-stock portfolio ?
@RyanOConnellCFA
2 жыл бұрын
I can look into doing this sometime down the road my friend
@farisalarifi6535
2 жыл бұрын
why you used Stdev.p instead of stdev.s? is there any differences
@RyanOConnellCFA
Жыл бұрын
I typically use stdev.p with large data sizes and stdev.s for smaller data sizes
@mauropires1733
Жыл бұрын
Very cool! You save my college work XD
@RyanOConnellCFA
Жыл бұрын
Glad I could help!
@henokhaile2899
Жыл бұрын
Hi, are you using a time interval from newest to oldest? i got the high set sharp ratio, the standard deviation and the return in the last "-30%, 130%, but not on the middle yellow color which is portfolio optimizerng. why that? i can't use stocks vs indices, or stock vs stock and both "indices" and "indices" ? and what is the limit by choosing ?thanks for the help
@RyanOConnellCFA
Жыл бұрын
Hello Henok! Did you happen to use a different set of securities or a different set of returns than I did in the video? And if so, you may have had a case where one security so substantially outperformed the other asset that the analysis says that you short one and go longer than 100% in the other
@Sosojuju
2 жыл бұрын
Thank you.
@aji-tstafd8141
Жыл бұрын
Your help is priceless, thank you so much
@RyanOConnellCFA
Жыл бұрын
Happy to help! It is my pleasure Aji
@jmnew3463
Жыл бұрын
Why did you use simple returns (Pt/Pt-1)-1 and not compounded returns (ln(Pt/Pt-1) ?
@RyanOConnellCFA
Жыл бұрын
In hindsight, I'd prefer to have used ln(). It is too late to edit the video now but I'd recommend using the natural logarithm going forward as it better reflects the effect of compounding
@Grace-tj4qc
2 жыл бұрын
How to find optimal portfolio?
@RyanOConnellCFA
2 жыл бұрын
It is the portfolio with the highest Sharpe Ratio
@yoyospencer8416
2 жыл бұрын
tip top
@julieta1949
Жыл бұрын
Yur sop 500 index is wrong
@RyanOConnellCFA
Жыл бұрын
Please elaborate on why you think the S&P 500 index is wrong
@jaiso434
6 ай бұрын
nice. thank you.
@RyanOConnellCFA
3 ай бұрын
No problem!
@iam-drake
5 ай бұрын
COOL.. IM HELPED
@RyanOConnellCFA
3 ай бұрын
Very glad to hear!
@permetras5460
Жыл бұрын
Thanks you
@RyanOConnellCFA
Жыл бұрын
My pleasure!
@rickguerrero2282
Жыл бұрын
Really nice work!
@RyanOConnellCFA
Жыл бұрын
Thank you!
@matan1998
Жыл бұрын
king!!! THANK YOU
@RyanOConnellCFA
Жыл бұрын
Happy to help!
@daiphutran1548
2 жыл бұрын
Fking life saver!!!
@RyanOConnellCFA
2 жыл бұрын
Lol I'm glad you thought so!
@wajihchtiba34
2 жыл бұрын
Great video again ! 😊
@RyanOConnellCFA
2 жыл бұрын
Thank you 🤗
@animeshmaiti607
Жыл бұрын
What is the codes for Optimal Portfolio Row?
@RyanOConnellCFA
Жыл бұрын
Hello Animesh, I'd love to help you but could you please be a little more specific with your question?
@animeshmaiti607
Жыл бұрын
@@RyanOConnellCFA In the Portfolio Statistics Column, you have calculated the Optimal Point(You named Optimal Portfolio) By highlighting Yellow color. How did you calculated?
@RyanOConnellCFA
Жыл бұрын
@@animeshmaiti607 I get it now! I just looked at the row that had the highest Sharpe Ratio and highlighted it yellow. If you want to use a formula, you could use MAX() and select the whole range of Sharpe Ratios to find the highest one
@RyanOConnellCFA
Жыл бұрын
@@piranha_finance Hello, I believe mean-variance frontier is synonymous with efficient frontier. Meaning, it is the same as what I did in this video
Пікірлер: 223