The following chart shows the variance-covariance matrix and the mean returns for six stocks. All the data are for monthly data (raw data are on the disk with the book).

a. Compute the global minimum variance portfolio (GMVP).

b. Compute the effi cient portfolio, assuming a monthly risk-free rate of 0.45%.

c. Show the frontier as the expected return and standard deviation of convex combinations of the GMVP and the efficient portfolio.

Transcribed Image Text:

A B C D E F G H Juniper Kroger Ford Target KR F TGT 1 2 KR 0.0052 0.0033 0.0015 3 F 0.0033 0.0120 0.0034 0.0072 Networks JNPR 0.0039 0.0068 0.0010 0.0063 Ahold AHO KeyCorp Mean KEY returns 0.24% 0.0015 -0.89% 4 TGT 0.0015 0.0034 0.0046 0.0058 0.0039 0.0015 0.48% 5 JNPR 0.0039 0.0072 0.0058 0.0379 0.0073 0.0023 0.44% 6 AHO 0.0068 0.0063 0.0039 0.0073 0.0389 0.0023 -1.46% 7 KEY 0.0010 0.0015 0.0015 0.0023 0.0023 0.0018 1.04%