PROJECT

Portfolio Management: FIN2521

3/22/2012

Term Project Requirements:

Term Project Requirements:

The project is group project. Each group

should have no more than 2 students.
Each group must select at least 2
securities different from selections of other
groups.
Projects are due on May 20. Late projects
will not be accepted and will receive a
score of zero.

All calculations must be done in Excel. An

electronic copy of your excel workbook
must be sent to the instructor by the due
date.
All project write-ups must be done in
Word. An electronic copy of your word
write-ups must be sent to the instructor by
the due date.

The project involves:

Term Project Requirements:
Your project write-up must have a title page with
the following format:

Syms School of Business

Portfolio Management: FIN2521
Term Project
Team Members:
DATE:

The project involves:

5) Construct and plot efficient portfolios using:

a combination of 2 stocks
a combination of 3 stocks
a combination of 4 stocks
construct at least 20 efficient portfolios in each case.
identify the global minimum variance portfolio in
each case.
Identify the optimal portfolio and plot CAL of this
portfolio using 3-month T-bills as the risk-free asset
in each case.

1) Select 4 common stocks.

2) Obtain monthly closing price data for the
period 12/2007~12/2011.
3) Use these data to compute monthly
holding period returns for each stock. Also
calculate expected return and standard
deviation for each stock.
4) Compute correlation coefficients for each
pair of stocks.

The project involves:

6)Compute betas for each single stock and for all the
efficient portfolios using the S&P500 as the proxy
for the market portfolio.
7)Compute Treynor ratios and Jensen alphas for
each single stock and for all the efficient portfolios.
8)Identify the best 10 performed assets.
9)See how those 10 assets performed in the first
three months of year 2012.

The following slides show excel demonstration!!!!

Namereturnmatrix:
selecttherange,enterthe
name(e.g.,donotuseF1or
AB2,insteaduseF_1orAB_2)
1974
intheNWcornerboxnextto
theformulaentry,thenhit
ENTER.
1975

AnnualRetruns(name=rrr)
AMR

BS

GE

HR

MO

UK

0.3505

0.1154

0.4245

0.2107

0.0758

0.2331

0.7083

0.2472

0.3719

0.2227

0.0213

0.3569

1976

0.7329

0.3665

0.2550

0.5815

0.1276

0.0781

1977

0.2034

0.4271

0.0490

0.0938

0.0712

0.2721

1978

0.1663

0.0452

0.0573

0.2751

0.1372

0.1346

1979

0.2659

0.0158

0.0898

0.0793

0.0215

0.2254

1980

0.0124

0.4751

0.3350

0.1894

0.2002

0.3657

1981

0.0264

0.2042

0.0275

0.7427

0.0913

0.0479

1982

1.0642

0.1498

0.6968

0.2615

0.2243

0.0456

1983

0.1942

0.3680

0.3110

1.8682

0.2066

0.2640

0.2032

0.0531

0.1501

0.1529

0.1025

0.1210

Namemeanreturnmatrix.

Mean(Mu)(name=mmm)

Computecovariancematrix:
selecttherangeforthecovariancematrix,thenentertheformula:
=MMULT(TRANSPOSE(RRRMMM),(RRRMMM))/(N1)andpress[CTRLShiftENTER].
Namecovariancematrix.

COVARIANCEMATRIX(V)(name=vvv)
AMR

0.229

0.042

0.120

0.055

0.023

0.007

BS

0.042

0.088

0.039

0.114

0.010

0.045

GE

0.120

0.039

0.096

0.049

0.022

0.016

HR

0.055

0.114

0.049

0.493

0.021

0.030

MO

0.023

0.010

0.022

0.021

0.009

0.002

UK

0.007

0.045

0.016

0.030

0.002

0.044

Constructdifferentportfoliosbysettingportfolioweightstodifferentvalues.
AMR

BS

GE

HR

MO

UK

sum(weights)

portfolio1

0.1000

0.3000

weights
0.5000

portfolio2

0.2200

0.1500

0.3000

0.6000

0.2000

0.4700

1.0000

portfolio3
portfolio4

0.0300
1.5000

0.0700
0.7000

0.5500
0.5000

0.8800
0.2000

0.0100
0.8000

0.5400
0.1000

1.0000
1.0000

AMR

BS

GE

1.0000

0.2000

0.7000

1.0000

HR

MO

UK

sum(weights)

globalminimumvarianceportfolio

0.0916

0.2085

weights
0.3030

efficientportfolio1
efficientportfolio2
efficientportfolio3

0.1898
0.1765
0.1979

0.6406
0.5822
0.6762

0.2722
0.2763
0.2696

0.0837
0.0730
0.0903

0.8584
0.8791
0.8458

0.7808
0.7299
0.8118

1.0000
1.0000
1.0000

efficientportfolio4

0.2896

1.0799

0.2408

0.1646

0.7029

1.1636

1.0000

0.0042

1.0114

0.4043

1.0000

Computeportfolio'svariance:
entertheformula:
=MMULT(MMULT(selectedweights,vvv),TRANSPOSE(selectedweights))andpress[CTRLShiftENTER].
Computeportfolio'smeanreturn:
entertheformula:
=MMULT(mmm,TRANSPOSE(selectedweights))andpress[CTRLShiftENTER].

portfolio1
portfolio2
portfolio3
portfolio4

efficientportfolio1
efficientportfolio2
efficientportfolio3
efficientportfolio4

PORTFOLIO'SVARIANCE

PORTFOLIO'SStDev

PORTFOLIO'SMEAN

PORTFOLIO'SVARIANCE

PORTFOLIO'SStDev

PORTFOLIO'SMEAN

WVW'
0.6144
0.2651
0.4542
0.4791

WVW'
0.0023
0.0080
0.0065
0.0089
0.0254

SQRT(WVW')
78.38%
51.49%
67.40%
69.22%

SQRT(WVW')
4.77%
8.92%
8.08%
9.45%
15.93%

Mu(W')
15.90%
15.31%
16.26%
20.34%

Mu(W')
11.53%
15.90%
15.31%
16.26%
20.34%

UseSolvertofindefficientportfolio(theminimumvarianceportfolioforagiventargetreturn:
setthetargetretruntodifferentvalues,runtheSolvertominimizestandarddeviationforeachtargetreturn.

Cell contains Portfolios

standard deviation

Cells contain Portfolios weights

Sum (weights) =1
Portfolios mean return = c

N35

B35:G35

H35=1
Q35=15.90%