Assume that you are trying to construct a portfolio of four assets: US stocks, UK stocks, Turkish stocks and cash. You have historical data for the returns of these four asset classes: NASDAQ Composite Index, FTSE 100 Index, BIST 100 Index and cash. We assume that the cash is invested in a money market account whose return is the 1-day federal fund rate. The times series for the "Total Return" are given for each asset between 1988 and 2018. Year FTSE 100 1988 1793.1 1989 2422.7 1990 2143.5 1991 2493.1 1992 2846.5 1993 3418.42 1994 3065.54 1995 3689.26 1996 4118.51 1997 5135.54 1998 5882.6 1999 6930. 2 2000 6222.46 20015217.35 2002 3940.36 2003 4476.87 2004 4814. 3 | 2005 | 5618.76 | 2006 6220.81 | 2007 | 6456.91 2008 4434.17 2009 5412.88 | 2010 | 5899.94 2011 5572.28 2012 5897.81 | 2013 6749.09 2014 6566. 1 2015 6242.32 2016 7142.83 2017 7687.77 2018 6728.10 NASDAQ BIST 100 MM 381.4 3.96 100 454.8 15.42 108.45 373.8 35.79 116.38 586.34 44.16 121.53 676.95 38.83 125.08 776.8 188.84 128.78 751.96 284.27 135.80 1052.13 393.37 143.41 1291.03 921.34 1570.35 2814.47 159.30 2192.69 2504.76 166.75 4 069.31 8776.2 175.59 2470.52 7977.83 186.83 1950.4 11467.24 190.23 1335.51 13364.17 192.59 2003.37 16007.59194.48 2 175.44 22560.87 198.68 2 205.32 | 38296.91 | 206.94 2415.29 38196.52 217.79 2652.28 | 54320.04 227.02 1577.03 24331.78 227.38 2269.15 46083.95 227.66 2652.87 66156.19 228.07 2605.15 53806.64 228.23 3019.51 74298.91 228.59 4176.59 74951.23 228.80 4736.0586147.32 229.07 5 007.41 76785.45 229.62 5383.12 72519.85 230.86 6903.39115333.01 233.86 6635.28 91270.48 239.17 (a) Construct a portfolio consisting of these four assets using Markowitz's Mean-Variance model. Solve the model for values of r between 4% and 40% (with increments of 2%) to draw the efficient frontier. Also provide the composition of the portfolio for each r value. (b) Construct a portfolio consisting of these four assets using MAD model for varying values of r between 4% and 40% (with increments of 2%) and write down the composition of the portfolio for each r value. For each r value considered, compare the variance of the portfolio found by MAD model with the variance of the portfolio found in part (a). Assume that you are trying to construct a portfolio of four assets: US stocks, UK stocks, Turkish stocks and cash. You have historical data for the returns of these four asset classes: NASDAQ Composite Index, FTSE 100 Index, BIST 100 Index and cash. We assume that the cash is invested in a money market account whose return is the 1-day federal fund rate. The times series for the "Total Return" are given for each asset between 1988 and 2018. Year FTSE 100 1988 1793.1 1989 2422.7 1990 2143.5 1991 2493.1 1992 2846.5 1993 3418.42 1994 3065.54 1995 3689.26 1996 4118.51 1997 5135.54 1998 5882.6 1999 6930. 2 2000 6222.46 20015217.35 2002 3940.36 2003 4476.87 2004 4814. 3 | 2005 | 5618.76 | 2006 6220.81 | 2007 | 6456.91 2008 4434.17 2009 5412.88 | 2010 | 5899.94 2011 5572.28 2012 5897.81 | 2013 6749.09 2014 6566. 1 2015 6242.32 2016 7142.83 2017 7687.77 2018 6728.10 NASDAQ BIST 100 MM 381.4 3.96 100 454.8 15.42 108.45 373.8 35.79 116.38 586.34 44.16 121.53 676.95 38.83 125.08 776.8 188.84 128.78 751.96 284.27 135.80 1052.13 393.37 143.41 1291.03 921.34 1570.35 2814.47 159.30 2192.69 2504.76 166.75 4 069.31 8776.2 175.59 2470.52 7977.83 186.83 1950.4 11467.24 190.23 1335.51 13364.17 192.59 2003.37 16007.59194.48 2 175.44 22560.87 198.68 2 205.32 | 38296.91 | 206.94 2415.29 38196.52 217.79 2652.28 | 54320.04 227.02 1577.03 24331.78 227.38 2269.15 46083.95 227.66 2652.87 66156.19 228.07 2605.15 53806.64 228.23 3019.51 74298.91 228.59 4176.59 74951.23 228.80 4736.0586147.32 229.07 5 007.41 76785.45 229.62 5383.12 72519.85 230.86 6903.39115333.01 233.86 6635.28 91270.48 239.17 (a) Construct a portfolio consisting of these four assets using Markowitz's Mean-Variance model. Solve the model for values of r between 4% and 40% (with increments of 2%) to draw the efficient frontier. Also provide the composition of the portfolio for each r value. (b) Construct a portfolio consisting of these four assets using MAD model for varying values of r between 4% and 40% (with increments of 2%) and write down the composition of the portfolio for each r value. For each r value considered, compare the variance of the portfolio found by MAD model with the variance of the portfolio found in part (a)