Reference no: EM132459192

Bloomberg Case study:

After completing your first month in your portfolio theory class, You started to think about what you learned in Markowitz and Treynor-Black portfolio optimization techniques. Thinking about your future investments, you decided to analyze the performance of 10 different ETFs. After analyzing these ETFs, you wondered what portfolio would you form using these ETFs?

You started a comprehensive analysis trying to perform the following tasks:

1. 1) Analyze the expected return for each ETF and their level of risk. Elaborate on their risk
2. characteristics. (systematic and unsystematic risks.)
3. 2) Using annual historical returns, conduct a Markowitz portfolio optimization. Show the
4. efficient frontier and show if there was any diversification benefits. (show individual
5. ETFs and the efficient frontier).
6. 3) What will happen to the efficient frontier if you didn't want to have any short position?
7. (Redo 2 with this limitation).
8. 4) Using annualized 2 year historical returns, try doing what you did in the previous two
9. tasks. What do you see? Was there any benefits for the long-term investing?
10. 5) You wanted to see if the exposure to 2 alternative investment vehicles would offer any
11. benefits to your optimization analysis.
12. 6) Discuss the limitations of Markowitz analysis.

After your analysis, two of your friends were happy with what they saw in your analysis. They asked you what portfolio do you recommend for each one of them if:

a. Ahmed wants to have a 8% return for his portfolio.

b. Khalid wants to have two-third the risk of the market.