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Abstract

We look at investment portfolio optimization. We create portfolios consisting of five stocks and a six-month bond by randomly selecting the stocks from the S&P 500. We take the data from July 1, 2004 to December 31, 2004 and use the Markowitz minimum variance model as well as the Mean Absolute Deviation model to determine the allocation of funds to each asset in each of the portfolios. We then compare the returns of the portfolios from January 3, 2005 to June 30, 2005 using a series of parametric and non-parametric tests.

Author Bio

Beth Bower is a senior at the College of William and Mary. This research was conducted during an REU at California State University, Chico during summer 2005. She will graduate with a B.S. in Mathematics and a B.A. in Economics in Spring 2006. She plans to attend graduate school for her masters degree.

Pamela Wentz is a senior at Millersville University. This research was conducted during an REU at California State University, Chico during summer 2005. She will graduate with a B.S. in Mathematics and a minor in economics in Spring 2006. She plans to attend graduate school for her masters degree in either statistics or operations research.

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