Business Commons^™

Creating An Optimal Portfolio With Covariance Adjustments For Moving Average Trends, Jayden Moore

Honors Program Theses

In this analysis, I investigate whether combining these two traditional methods of portfolio construction, mean-variance optimization and trend following, enhance the performance of a portfolio. Specifically, I consider whether stock trends within a pool of stock mechanically influences the covariance matrix for this pool of assets–a crucial input for mean-variance optimization. I then use these trend modified covariances to form a new mean-variance optimized portfolio and then evaluate performance. Instead of using the trends to determine whether or not to invest in a stock, as trend analysis postulates, I will be using trends to create new covariances between assets that …

Biotech Fever: Market Overreaction To Fda Clinical Trials, Ethan J. Hugstad

Honors Program Theses

Picture this: someone buys the stock of a firm that is about to announce the results of a drug’s FDA clinical trial the next day. They go to bed that night, imagining the potential of their newly owned business to finally cure a disease that has impacted so many families. They wake up the next morning to find that the firm has lost half of its market value because the drug failed. This is the stark reality that many small investors face: the unpredictability of price movements in response to nonfinancial information being released to the public.

The Impact Of Hyped Ipo's On The Market, Elias Escobedo

Honors Program Theses

Increasingly, finance researchers are including irrationality into their understanding of the stock market, including emotions (Tetlock, 2007) or misunderstanding of available information (Huberman & Regev, 2007). The popularity of the recent Alibaba IPO demonstrates that investors can get excited.1 Is excitement an important determinant of the behavior of stock market investors? Empirical evidence suggests that investors “herd” into similar stocks (Wermers, 1999) and may experience common feelings of optimism and pessimism (Tetlock, 2007). If investor’s emotions correlate, what about excitement? Can the excitement for a particular stock spill over into the excitement of other stocks?

To analyze the impact excitement …