***SPREADSHEET UVA-S-F-1341 GOES WITH THIS CASE***The key objectives of this case are (1) to familiarize students with a simple version of the Markowitz optimal-asset allocation model, (2) to develop students' intuition regarding optimal-asset allocation as specific inputs into the model (e.g., expected returns, standard deviations, correlations) change values, and (3) to develop students'
... [Show full abstract] intuition regarding constraints that alternative investors may face (e.g., the presence of shorting constraints) and their impact on the optimal portfolio. The case includes an Excel spreadsheet that contains relevant data (e.g., returns, standard deviations, correlations) on several assets and an Excel model that takes three of those assets and makes use of the Excel Solver Add-In to compute optimal weights for the three asset portfolios as well as the expected return, standard deviation, and Sharpe ratio of the optimal portfolio. Students are asked to alter many of the inputs into the model and explain the effects of those changes on the optimal portfolio.