Question
1. Choose 4 Canadian stocks. Use ca.finance.yahoo.com to download weekly adjusted close prices for the past calendar year (03/11/2016-02/11/2017) for each chosen stock. a. (10
1. Choose 4 Canadian stocks. Use ca.finance.yahoo.com to download weekly adjusted close prices for the past calendar year (03/11/2016-02/11/2017) for each chosen stock. a. (10 MARKS) Find weekly returns of the stock for the past year (you must have about 50 returns for each stock). Find the historical mean of the returns of each stock and find the covariance matrix V of the chosen 4 stocks. b. (30 MARKS) Assume that the annual risk-free rate is 1.0% and consider an investor whose coefficient of risk aversion equals to 4. Use the formula on page 42 of the class notes to find the optimal weight of each stock and T-bills in the complete portfolio of the investor. Which stock has the highest weight? How you explain it? Does any stock have a negative weight? Why?
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