Discuss about optimal portfolio construction

Assignment Help Financial Management

Reference no: EM133203689

Assignment:

Project

Instructions: This project is designed to help you apply what you have learned about optimal portfolio construction. You may use either Excel or Stata to complete the project. Regardless of which software you use, you must document with images each step. Briefly explain your work throughout the project: what is the purpose of the calculations you are doing? The main goal of the project is for you to understand the theory behind optimal portfolio choice, as well as find good data sources and become familiar with using statistical software.

Important: Your submissions should be in TWO files

• One report file (Word, PDF, etc.) that should look and read like a short paper. In particular, it should have an Introduction section, a Data section, a Results section etc. The report should include tables and graphs. Please do not treat this as a Problem Set.

• One data analysis file from the software that you used to generate your results (e.g., .xlsx file for Excel, .do file for Stata, etc.)

Part I: Optimal Portfolio Construction

1. Using the estimates of expected returns, variances and covariances from part I, graph the efficient frontier of the portfolio opportunity set using a software package.

2. Next, figure out the optimal weights we ought to place on each stock to form our optimal risky portfolio. What is the expected return and variance of your optimal risky portfolio?

3. In the same graph as the efficient frontier, draw the Capital Allocation Line that goes through the risk-free asset and the optimal risky portfolio.

4. In the same graph as the efficient frontier, fix a utility level and draw your indifference curve that corresponds to that utility level. Draw multiple indifference curves until you draw the one that is tangent to the Capital Allocation Line.

5. Recover the appropriate weights on the optimal risky portfolio and the risk-free asset that correspond to the tangency between the indifference curve and the Capital Allocation Line.

Reference no: EM133203689

Questions Cloud

Questions for further thought and discussion : Write about #2 under Questions for Further Thought and Discussion at the end of Chapter 10 (pg. 249).

Presiding judge horkins a stream of new evidence : "I find Mr. Ghomeshi not guilty on all these charges," a judge said yesterday morning in an Ontario court. Just over a month earlier, Jian Ghomeshi-the former r

Describe the importance of revisiting ideas : Describe the importance of revisiting your ideas and discuss how you would use feedback to improve your work

What can the worlds most powerful brands tell us : Which industries dominate in the top-10 rankings? In the top-25 rankings? What can the world's most powerful brands tell us about global consumer markets?

Discuss about optimal portfolio construction : This project is designed to help you apply what you have learned about optimal portfolio construction. SUNY university at buffalo. ECO 426.

You are old enough to do this right : Glendale Community College You are old enough to do this right - A year later the Stable Project is completed, and Siegel asks for his final payment of $65,000

Discuss how consumers purchase retail products : Prompt: Name five major retailers in the United States and discuss how consumers purchase retail products through the retailers you selected

What does foreman mean by pancake people : Foreman states that "I see within us all (myself included) the replacement of complex inner density with a new kind of self-evolving under the pressure of infor

What are the elements of an express contract : Grossmont College - What are the elements of an express contract and What would be Kirk's best defense to George's breach of contract lawsuit

User Account

All Pages