Hi,
My business portfolio includes real estate properties and private equity, all of the other assets are return based.
What is the best way to include this assets, as they are not measured in monthly returns bases.
Thank you
In the absence of return or price data for assets intended for optimization, we may use proxies. In this instance, we must choose publicly traded securities, including indexes or ETFs, that most accurately represent the sector or category of investment asset for which we need a portfolio allocation.
The input data can be either all return based or all price based. When we have a mix of return and price data we can convert the price data to returns in a separate spreadsheet by using a simple formula: (end price-start price)/start price. The resulting return data can then be used in the input data along with the other returns.
If we do not have any return or price data for assets that we want to include in optimization, we can also use proxies. In this case we need to find publicly traded securities which may include indices or ETFs that best reflect the industry or type of investment asset that we require a weighting for in the portfolio.
