Discuss allocation found in light of assets characteristics

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Reference no: EM132640488

Question 1. Briefly discuss the five asset classes in Table 1 of Appendix 1. Using the data from Table 1, calculate the Arithmetic Mean (AM), Geometric Mean (GM) and Standard Deviation (σ) of returns of each of the five asset classes. Briefly, discuss the risk-return characteristics of each asset class with reference to these measures [What does the data say in terms of the risk and return of the different assets? How about using past rates of return to estimate expected returns and volatility? Arithmetic versus geometric mean? ](

Yr1	2.80%	6.30%	-9.10%	6.40%	-5.70%
Yr2	6.70%	4.30%	-11.89%	1.82%	-17.40%
Yr3	-12.10%	4.80%	-22.10%	1.24%	49.60%
Yr4	9.70%	5.30%	28.68%	0.98%	-0.10%
Yr5	22.80%	5.30%	10.88%	2.16%	36.60%
Yr6	17.60%	5.50%	4.91%	4.16%	43.20%
Yr7	19.00%	6.30%	15.79%	5.24%	-4.10%
Yr8	11.80%	6.80%	5.49%	4.24%	60.20%
Yr9	-41.30%	4.30%	-37.00%	0.16%	-63.10%
Yr10	30.80%	3.80%	26.46%	0.12%	81.40%
Yr11	-2.60%	4.80%	15.06%	0.18%	17.90%
Yr12	-14.50%	4.30%	2.11%	0.07%	12.80%
Yr13	14.60%	3.00%	16.00%	0.16%	-0.30%
Yr14	15.10%	2.50%	32.39%	0.09%	-2.70%
Yr15	1.10%	2.50%	13.69%	0.12%	-48.80%
Yr16	-2.10%	2.00%	1.38%	0.24%	-33.90%
Yr17	7.00%	1.50%	11.96%	0.54%	51.50%
Yr18	7.00%	1.50%	21.83%	1.30%	21.20%
Yr19	-6.90%	1.50%	-4.48%	2.27%	-24.10%
Yr20	18.40%	0.75%	31.49%	1.55%	25.40%

)

Question 2. Construct an efficient portfolio. Assume the risk-free rate over the period is 1.75%. Calculate the Efficient Frontier and Capital Allocation Line (CAL) for the five asset classes using the Excel Solver Tool. You will also need to calculate and provide the 'Bordered Covariance' and 'Correlation Matrices'. Discuss the implications of these five assets on efficient frontier and CAL. [[Efficient frontier: all the portfolios such that, for a given level of expected return, the variance (risk) is minimal. Watch the accompanying video on the Learning Portal to learn how to use Excel Solver. Insert the chart with the frontier in the body of the report. Indicate the optimal portfolio and, if possible, the optimal complete portfolio. Discuss the allocation found in light of assets' characteristics.]

Question 3. Synthesise the various Modern Portfolio Theory (MPT) models in the four credible source references listed (i.e. Bodie, Zane & Marcus 2018; McKay, Shapiro & Thomas 2018; Page & Panariello 2018; and Santacruz 2016) to provide an in-depth and critical discussion of your results from parts a. and b. Why (or why not) is minimum- variance portfolio still liked by academics and practitioners? [Critically discuss the Markowitz model and others. Examples: SIM, CAPM, Black-Treynor, APT, multi-index models to cite a few. Elaborate on plausibility of assumptions and whether the models are used in practice. Make sure to read/cite suggested articles]

Stock price, So = 84, Excersise price, X= 78, Interest Rate, r = 2.9 annually, Time to expiration , t=.5 everyth 6 moths, Standard deviation=0.3 annually.

GOLD prises in USD for 15 days (ranges between 1700 to 1750).

Average return, x=fund portofolio 16% and Market 12%

Beta= 1.19 fund and 1 Market

Standard deviation = 21% fund and 16% Market

nonsystematic risk = 7% for funds 0 for Market

Reference no: EM132640488

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