SOMEONE ASKED 👇
Pick ten stocks for a portfolio. What is your optimal portfolio if you do not allow short sales? Use historical inputs. Are the weights more reasonable? Would you restrict short sales? Why or why not? Graph the MVF in this case.
HERE THE ANSWERS 👇
If short sales are not allowed, the “Solver” analysis is further constrained, i.e. that stock weighting should be non-negative. The optimal portfolio consists of only two stocks, TSLA, SHSAX, and GGHCX. Their weights are 0,225, 0,33, and 0,445, respectively. So I would suggest that he spend 22.5 million on TSLA stock, 33 million on SHSAX stock, and 44.5 million on GGHCX stock. The calculated weights are more reasonable than those previously calculated where weights may be both positive and negative. Therefore, it is possible to restrict short sales to obtain reasonable weight stocks. In this case, the MVF graph looks appropriate (see below). This is because stock weight values have been restricted.
Comments: 25 Further research on the topic