Graduation Year

Spring 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Mitch Warachka

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© 2013 Michael A. Cahill

Abstract

This paper investigates the role of U.S. infrastructure investments in a multi-asset portfolio, by using monthly return data for eight different asset classes from the period December 2002 to March 2013. Applying mean variance, as well as mean-downside risk, optimization models, I show that U.S. infrastructure plays an important role in delivering better risk/return trade-offs than more traditional portfolios. Infrastructure proves to be most beneficial to moderate-risk portfolios where the standard deviation ranges from 2% to 6% and the maximum allocation to infrastructure is 65.49%. Additionally, I show that infrastructure is more attractive to investors who are averse to variance, rather than downside risk.

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