Portfolio Management Case Study 2
Submit an Microsoft-Excel File with necessary explanations, before 21:00 on Jan 6
As a portfolio manager you wish to determine the optimal asset allocation of 4
stocks (*see Page 2) for your portfolio in the case where you can lend and borrow at
the risk free rate 0.2% per month.
You will have to:
1.Calculate the average monthly return, population variance and standard deviation
for each of the 4 stocks;
2.Construct a co-variance matrix;
3.Form a portfolio with equal weights. Calculate the expected return, variance and
standard deviation of the equal weight-portfolio;
4.Make use of the SP500 return, and find the beta for your equal weight portfolio
(Provide the graph of characteristic line);
5.According to your Policy Statement, short sale is not allowed. Find the optimal
asset allocation of the 4 stocks, when risk free rate=0.2%;
6.Find the beta for your optimal portfolio (Provide the graph of characteristic line)
Note: you are free to make all the assumptions you believe are necessary but these
should be explained.
*Returns of the 4 stocks and the SP500:
Date:
STOCK A:
STOCK B:
STOCK C:
STOCK D:
SP500
2015/1/1
-0.069
0.063
-0.090
-0.043
-0.023
2015/2/1
0.052
0.068
-0.023
-0.064
0.006
2015/3/1
0.015
0.122
0.080
0.021
0.073
2015/4/1
-0.004
0.047
0.060
0.004
0.035
2015/5/1
0.167
0.259
0.003
0.165
0.149
2015/6/1
-0.006
0.041
0.110
0.082
0.067
2015/7/1
-0.082
-0.125
0.030
0.042
-0.033
2015/8/1
-0.130
-0.075
-0.057
-0.088
-0.078
2015/9/1
-0.115
0.024
0.012
-0.064
-0.015
2015/10/1
0.006
0.012
0.041
0.064
0.033
2015/11/1
0.095
0.133
0.032
0.093
0.089
2015/12/1
0.019
0.042
0.073
0.002
0.039
2016/1/1
0.068
0.304
0.075
0.039
0.145
2016/2/1
0.140
0.057
0.187
0.097
0.114
2016/3/1
-0.035
0.023
0.037
-0.026
0.009
2016/4/1
-0.031
-0.067
-0.018
-0.032
-0.040
2016/5/1
0.008
0.109
0.024
-0.003
0.045
2016/6/1
-0.039
-0.069
-0.065
0.014
-0.044
2016/7/1
0.085
0.079
0.067
-0.038
0.047
2016/8/1
-0.017
0.160
0.094
0.056
0.097
2016/9/1
-0.040
0.044
-0.020
-0.032
-0.003
2016/10/1
0.043
0.055
-0.028
0.021
0.020
2016/11/1
-0.118
0.036
-0.034
-0.032
-0.017
2016/12/1
0.093
0.144
0.192
0.115
0.146
2017/1/1
0.194
0.081
-0.048
-0.105
0.007
2017/2/1
0.126
0.027
0.005
-0.052
0.011
2017/3/1
-0.014
-0.040
-0.006
-0.025
-0.024
2017/4/1
-0.037
-0.070
0.028
0.020
-0.015
2017/5/1
0.043
0.098
-0.005
-0.019
0.032
2017/6/1
-0.049
-0.132
-0.045
-0.036
-0.074
2017/7/1
-0.002
0.039
0.087
0.113
0.068
2017/8/1
-0.042
0.024
0.027
-0.031
0.004
2017/9/1
0.051
0.081
0.041
-0.029
0.039
2017/10/1
0.088
0.102
-0.103
0.087
0.035
2017/11/1
0.071
0.049
0.048
-0.007
0.037
2017/12/1
0.019
-0.083
-0.023
0.018
-0.030
2018/1/1
0.062
0.013
-0.031
-0.047
-0.010
2018/2/1
-0.027
-0.036
-0.102
0.011
-0.043
2018/3/1
0.003
0.109
-0.037
0.063
0.043
2018/4/1
-0.083
-0.076
-0.266
0.045
-0.103
2018/5/1
0.080
0.083
0.072
0.008
0.061
2018/6/1
-0.074
-0.050
-0.024
-0.032
-0.040
2018/7/1
-0.078
-0.159
-0.028
-0.053
-0.085
2018/8/1
0.047
0.015
0.034
0.055
0.034
2018/9/1
-0.038
0.098
-0.046
-0.059
0.002
2018/10/1
0.141
-0.029
0.172
0.051
0.068
2018/11/1
-0.073
-0.002
0.042
-0.037
-0.004
2018/12/1
0.069
0.008
0.005
0.017
0.015
2019/1/1
0.110
0.056
0.083
-0.026
0.049
2019/2/1
0.016
-0.031
-0.071
-0.023
-0.036
2019/3/1
-0.125
0.027
-0.084
-0.028
-0.035
2019/4/1
0.014
0.091
0.077
0.095
0.080
2019/5/1
0.021
0.162
-0.096
0.048
0.042
2019/6/1
-0.040
-0.040
0.060
-0.062
-0.016
2019/7/1
0.020
-0.002
0.068
-0.013
0.018
2019/8/1
-0.027
0.129
0.109
0.292
0.148
2019/9/1
-0.061
-0.034
0.016
-0.039
-0.023
2019/10/1
0.021
0.122
0.002
-0.042
0.035
2019/11/1
0.101
-0.002
-0.024
0.015
0.006
2019/12/1
0.057
-0.028
-0.024
-0.005
-0.012
2020/1/1
0.108
-0.029
0.039
0.021
0.018
2020/2/1
0.049
0.061
0.017
-0.019
0.026
2020/3/1
0.002
0.129
0.090
0.023
0.078
2020/4/1
0.037
0.149
0.036
0.021
0.072
2020/5/1
0.002
0.036
0.076
0.044
0.047
2020/6/1
0.000
0.067
0.032
0.044
0.044
2020/7/1
0.058
0.001
-0.037
-0.029
-0.012
2020/8/1
-0.041
0.022
0.042
0.085
0.038
2020/9/1
0.020
-0.022
0.132
0.054
0.048
2020/10/1
0.006
0.105
0.009
-0.106
0.013
2020/11/1
0.043
-0.129
0.042
0.056
-0.014
2020/12/1
-0.019
0.007
0.040
0.088
0.035
2021/1/1
0.091
0.054
0.028
-0.028
0.029
2021/2/1
0.019
0.067
0.067
0.055
0.059
2021/3/1
-0.025
0.045
-0.104
0.044
-0.007
2021/4/1
-0.028
0.098
0.027
0.084
0.061
2021/5/1
-0.020
0.049
0.103
0.004
0.047
2021/6/1
0.035
0.012
0.057
-0.018
0.020
2021/7/1
-0.114
-0.019
0.006
-0.003
-0.017
2021/8/1
0.025
0.039
-0.142
0.092
-0.004
2021/9/1
0.110
0.077
0.013
0.109
0.069
2021/10/1
0.043
0.041
0.029
-0.031
0.020
2021/11/1
0.121
0.143
0.118
0.124
0.128
2021/12/1
-0.056
0.053
0.106
0.049
0.057