Optimization: Starting forms used in lecture examples

Finance 205/720, Professor Stambaugh

• cash-stock asset allocation
  
  
• tangent portfolio
  
  
• stock-bond mix
  
  
• lending and borrowing
  
  
• capitalization-sorted equity portfolios, with expected returns as
  
  
  • sample average returns
    
    
  • neutral expected returns
    implied by a normal portfolio mix of (.7 .15 .10 .05)
    
    
  • Black-Litterman expected returns
    obtained by combining the neutral expected returns with a view that small-cap stocks (asset 4) will outperform their neutral expected return by 10 basis points