Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 2

As discussed in Section 10.4, the Markowitz Model uses the variance of the portfolio as the measure of risk. However, variance includes deviations both below and above the mean return. Semivariance includes only deviations below the mean and is considered by many to be a better measure of risk.
a. Develop a model that minimizes semivariance for the Hauck Financial data given in the file HauckData with a required return of 10 percent. ( Hint: Modify model (10.8)-(10.17). Define a variable d s for each
scenario and let
.

b. Solve the model you developed in part a with a required expected return of 10 percent.