The Problem in Words
Again, you are considering investing in three stocks (ATT, GM, and USX). You have determined there are 12 equally likely scenarios in the forthcoming period. You have come up with predicted rates of return for each of the stocks under the twelve scenarios. You have a target growth rate of 15% for your portfolio. Your goal is to construct optimal portfolios that minimize expected risk while meeting the expected level of return using three different risk measures—variance, downside, and semi-variance.