CASE STUDY 1 (15%) A wealthy investor, David, approaches your consulting firm seeking for investment advices. David plans to invest his RM1 million in the following 16 stocks traded on Bursa Malaysia: 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) Axiata Groups CIMB Group Holdings Digi.com Genting Malaysia Hong Leong Bank IOI Corporation Malayan Banking Maxis MISC Petronas Gas Public Bank Sime Darby Telekom Malaysia Tenaga Nasional UMW Holdings YTL Corporation Suppose David is considering allocating all his RM1 million in the 16 stocks equally. He would like to know the expected return and risk for this 16-stock portfolio. What is your advice if David expects a minimum return of 5%, but won't tolerate risk exceeding 3% (in standard deviation)? Your analysis involves: (i) calculate the monthly return for each stock; calculate the mean of the monthly return for each stock; (iii) calculate the variance of the monthly return for each stock; (iv) construct the variance-covariance matrix; (v) compute the 16-stock portfolio expected return (vi) compute the 16-stock portfolio risk Monthly Closing Prices PETRONAS AXIATA GROUP DIGI.COM GENTING MALAYSIA HONG LEONG BANK 101 MALAYAN BANKING MAXIS MISC BHD. PUBLIC BANK SIME DARBY TELEKOM MALAYSIA TENAGA NASIONAL UMW HOLDINGS YTL GAS 5.14 3.83 8.58 CIMB GROUP HOLDINGS 7.44 6.91 7.16 7.69 7.41 3.88 3.96 4.35 4.37 5.47 5.93 9.20 9.14 5.90 6.00 1.39 1.41 4.67 4.95 4.80 5.19 8.20 4.04 3.91 5.17 5.62 9.69 1.64 4.02 4.06 4.37 4.32 8.75 8.87 5.48 5.71 5.92 6.09 6.12 6.19 6.28 6.43 5.38 7.00 6.91 7.15 7.30 7.87 7.99 12.97 13.12 13.24 13.22 1328 13.33 13.33 9.74 5.32 5.20 5.31 5.37 1.68 15.20 15.68 16.80 16.84 16.78 17.20 18.00 18.50 3.92 3.84 3.69 5.39 6.43 4.04 4.00 1.52 4.80 4.03 9.74 9.68 7.50 5.39 6.67 1.73 4.22 4.25 4.20 4.32 8.63 8.75 8.70 8.76 6.39 4.61 9.13 2.02 5.47 5.86 7.57 7.85 4.25 4.44 4.81 3.60 3.37 9.89 9.83 5.65 5.65 6.74 6.75 9.47 6.41 7.04 3.53 6.08 10.20 7.79 7.50 9.15 9.01 4.52 4.26 4.25 4.24 9.81 9.80 1.86 1.81 1.72 1.75 5.99 6.50 6.53 5.92 6.59 3.50 6.19 5.28 5.31 6.92 6.96 6.43 10.00 9.98 9.03 9.78 5.98 9.05 5.47 10.62 7.47 7.63 4.02 4.30 4.16 4.03 4.09 4.01 4.12 4.02 3.96 3.79 4.07 8.97 9.52 1.77 1.90 6.84 6.82 6.95 6.94 6.94 7.00 6.94 7.22 9.20 8.88 7.21 9.30 6.30 6.40 4.83 5.29 4.92 4.57 4.63 4.64 4.75 4.76 4.45 5.27 3.59 3.42 3.55 3.67 3.70 3.62 3.76 3.90 3.89 4.16 4.21 7.20 7.63 6.04 5.55 5.32 5.39 9.21 9.27 1.65 1.65 1.63 1.64 6.60 6.77 5.37 4.36 5.52 9.44 9.42 7.85 8.35 4.88 5.49 6.75 6.63 7.74 8.28 8.28 7.87 7.28 4.12 4.40 1.69 1.66 5.10 9.58 8.29 8.89 6.79 4.65 4.42 4.37 4.34 5.44 4.72 9.48 9.39 5.40 5.27 5.41 5.24 1.67 1.55 6.74 9.15 9.35 9.62 10.18 10.40 10.26 10.00 9.84 9.76 9.78 9.94 9.63 9.78 9.68 8.73 9.03 6.88 7.52 4.22 5.12 9.50 1.54 6.87 7.47 4.32 5.11 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 - Sep-19 - Oct-19 Nov-19 Dec-19 9.53 4.24 4.38 4.36 4.35 7.58 7.62 6.92 7.16 7.15 7.51 7.34 7.32 10.54 10.98 11.70 12.20 11.81 11.87 12.02 13.20 12.99 12.95 14.19 14.17 14.29 13.76 14.09 13.98 13.98 13.71 13.43 13.34 13.63 13.51 13.80 13.65 13.92 13.63 13.71 13.67 13.53 13.42 13.34 13.65 13.92 14.13 14.13 13.82 13.51 13.55 13.88 13.78 13.61 13.20 12.95 13.13 12.64 12.68 13.51 13.56 13.44 9.65 9.52 8.99 9.11 9.31 4.20 4.22 4.07 4.20 9.44 6.72 6.90 6.56 6.55 6.67 6.73 6.93 6.97 6.96 6.93 7.00 7.05 7.06 7.05 7.20 7.16 7.08 9.90 9.88 13.92 13.88 13.94 15.41 15.04 15.78 15.04 15.62 15.76 15.91 16.44 16.42 16.73 16.53 17.19 17.73 17.81 18.80 18.49 18.49 18.57 19.52 20.93 19.58 19.78 19.28 18.90 18.54 18.58 18.30 18.14 18.32 18.88 19.48 18.50 18.72 19.00 18.00 17.52 18.08 18.38 18.52 6.65 6.37 6.37 6.53 6.76 6.76 6.87 7.11 6.84 7.00 7.19 7.03 7.27 6.97 6.97 6.96 6.95 6.57 6.75 6.76 6.55 6.48 6.74 6.93 6.85 7.10 7.05 7.19 6.94 6.89 6.37 6.67 6.57 6.55 6.59 6.56 9.55 9.67 19.38 19.00 19.60 18.40 19.52 18.56 18.32 19.00 19.72 21.24 20.90 20.84 20.14 22.00 24.52 23.86 24.28 23.3& 23.60 23.80 23.50 24.50 24.50 23.48 22.80 22.92 22.48 22.72 22.16 22.20 23.06 23.02 22.72 21.90 21.26 22.08 21.32 21.96 22.98 22.92 22.70 9.83 9.88 4.70 4.86 5.00 4.87 4.96 4.69 5.15 5.39 5.54 5.42 5.73 5.69 5.73 5.85 6.19 6.30 6.17 6.41 6.35 6.30 6.01 5.61 5.36 5.40 5.23 5.55 5.26 5.00 5.40 4.40 9.50 7.00 7.38 4.40 4.56 4.71 4.20 4.61 4.80 5.00 4.93 5.25 5.00 4.78 4.81 4.89 4.82 4.80 4.71 4.71 4.59 4.34 3.99 4.06 4.24 4.00 4.07 4.26 4.35 9.46 9.15 11.94 12.14 12.80 13.34 14.30 14.42 14.60 13.86 12.58 11.82 12.80 12.44 12.06 11.84 11.80 10.98 10.76 10.80 10.92 11.70 12.36 12.26 11.68 11.28 10.96 10.90 11.08 10.84 10.64 10.72 10.14 10.00 8.50 7.52 8.22 7.98 7.87 4.51 4.18 4.30 4.22 4.07 4.06 4.11 4.23 5.49 5.70 6.00 6.35 6.90 6.51 6.18 6.50 6.52 6.88 6.75 6.86 7.31 7.22 7.75 8.42 8.49 9.15 8.30 7.72 7.80 8.10 8.80 9.03 9.24 9.68 9.68 9.19 7.03 6.49 5.83 5.56 5.50 5.95 6.22 5.90 5.67 5.47 5.38 5.00 4.46 4.61 4.50 4.54 5.24 5.14 5.55 5.51 5.67 5.89 6.20 6.18 6.35 6.24 6.36 6.60 7.20 7.08 6.88 6.99 7.12 7.27 7.41 7.28 6.54 6.55 6.49 6.68 6.66 6.51 6.78 9.43 9.86 11.38 11.80 12.00 11.96 11.90 12.06 12.18 12.42 12.38 12.38 13.36 14.26 13.80 14.50 14.72 14.36 14.36 13.36 12.64 12.20 11.18 12.02 12.66 13.36 13.32 10.10 9.96 9.70 9.46 9.17 8.72 9.20 9.33 9.21 9.03 9.14 9.20 8.76 8.56 8.26 8.32 8.40 9.40 9.33 1.65 1.62 1.62 1.54 1.58 1.53 1.61 1.63 1.62 1.57 1.62 1.68 1.66 1.58 1.59 1.76 1.65 1.67 1.67 1.59 1.55 1.58 1.56 1.60 1.51 1.58 9.27 9.06 6.74 4.30 4.25 4.20 4.27 3.96 4.15 4.30 4.40 6.58 6.40 6.37 6.14 8.32 8.52 8.72 7.45 7.79 8.36 7.91 7.75 5.80 6.17 6.13 6.41 4.46 6.80 9.37 1.57 CASE STUDY 1 (15%) A wealthy investor, David, approaches your consulting firm seeking for investment advices. David plans to invest his RM1 million in the following 16 stocks traded on Bursa Malaysia: 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) Axiata Groups CIMB Group Holdings Digi.com Genting Malaysia Hong Leong Bank IOI Corporation Malayan Banking Maxis MISC Petronas Gas Public Bank Sime Darby Telekom Malaysia Tenaga Nasional UMW Holdings YTL Corporation Suppose David is considering allocating all his RM1 million in the 16 stocks equally. He would like to know the expected return and risk for this 16-stock portfolio. What is your advice if David expects a minimum return of 5%, but won't tolerate risk exceeding 3% (in standard deviation)? Your analysis involves: (i) calculate the monthly return for each stock; calculate the mean of the monthly return for each stock; (iii) calculate the variance of the monthly return for each stock; (iv) construct the variance-covariance matrix; (v) compute the 16-stock portfolio expected return (vi) compute the 16-stock portfolio risk Monthly Closing Prices PETRONAS AXIATA GROUP DIGI.COM GENTING MALAYSIA HONG LEONG BANK 101 MALAYAN BANKING MAXIS MISC BHD. PUBLIC BANK SIME DARBY TELEKOM MALAYSIA TENAGA NASIONAL UMW HOLDINGS YTL GAS 5.14 3.83 8.58 CIMB GROUP HOLDINGS 7.44 6.91 7.16 7.69 7.41 3.88 3.96 4.35 4.37 5.47 5.93 9.20 9.14 5.90 6.00 1.39 1.41 4.67 4.95 4.80 5.19 8.20 4.04 3.91 5.17 5.62 9.69 1.64 4.02 4.06 4.37 4.32 8.75 8.87 5.48 5.71 5.92 6.09 6.12 6.19 6.28 6.43 5.38 7.00 6.91 7.15 7.30 7.87 7.99 12.97 13.12 13.24 13.22 1328 13.33 13.33 9.74 5.32 5.20 5.31 5.37 1.68 15.20 15.68 16.80 16.84 16.78 17.20 18.00 18.50 3.92 3.84 3.69 5.39 6.43 4.04 4.00 1.52 4.80 4.03 9.74 9.68 7.50 5.39 6.67 1.73 4.22 4.25 4.20 4.32 8.63 8.75 8.70 8.76 6.39 4.61 9.13 2.02 5.47 5.86 7.57 7.85 4.25 4.44 4.81 3.60 3.37 9.89 9.83 5.65 5.65 6.74 6.75 9.47 6.41 7.04 3.53 6.08 10.20 7.79 7.50 9.15 9.01 4.52 4.26 4.25 4.24 9.81 9.80 1.86 1.81 1.72 1.75 5.99 6.50 6.53 5.92 6.59 3.50 6.19 5.28 5.31 6.92 6.96 6.43 10.00 9.98 9.03 9.78 5.98 9.05 5.47 10.62 7.47 7.63 4.02 4.30 4.16 4.03 4.09 4.01 4.12 4.02 3.96 3.79 4.07 8.97 9.52 1.77 1.90 6.84 6.82 6.95 6.94 6.94 7.00 6.94 7.22 9.20 8.88 7.21 9.30 6.30 6.40 4.83 5.29 4.92 4.57 4.63 4.64 4.75 4.76 4.45 5.27 3.59 3.42 3.55 3.67 3.70 3.62 3.76 3.90 3.89 4.16 4.21 7.20 7.63 6.04 5.55 5.32 5.39 9.21 9.27 1.65 1.65 1.63 1.64 6.60 6.77 5.37 4.36 5.52 9.44 9.42 7.85 8.35 4.88 5.49 6.75 6.63 7.74 8.28 8.28 7.87 7.28 4.12 4.40 1.69 1.66 5.10 9.58 8.29 8.89 6.79 4.65 4.42 4.37 4.34 5.44 4.72 9.48 9.39 5.40 5.27 5.41 5.24 1.67 1.55 6.74 9.15 9.35 9.62 10.18 10.40 10.26 10.00 9.84 9.76 9.78 9.94 9.63 9.78 9.68 8.73 9.03 6.88 7.52 4.22 5.12 9.50 1.54 6.87 7.47 4.32 5.11 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 - Sep-19 - Oct-19 Nov-19 Dec-19 9.53 4.24 4.38 4.36 4.35 7.58 7.62 6.92 7.16 7.15 7.51 7.34 7.32 10.54 10.98 11.70 12.20 11.81 11.87 12.02 13.20 12.99 12.95 14.19 14.17 14.29 13.76 14.09 13.98 13.98 13.71 13.43 13.34 13.63 13.51 13.80 13.65 13.92 13.63 13.71 13.67 13.53 13.42 13.34 13.65 13.92 14.13 14.13 13.82 13.51 13.55 13.88 13.78 13.61 13.20 12.95 13.13 12.64 12.68 13.51 13.56 13.44 9.65 9.52 8.99 9.11 9.31 4.20 4.22 4.07 4.20 9.44 6.72 6.90 6.56 6.55 6.67 6.73 6.93 6.97 6.96 6.93 7.00 7.05 7.06 7.05 7.20 7.16 7.08 9.90 9.88 13.92 13.88 13.94 15.41 15.04 15.78 15.04 15.62 15.76 15.91 16.44 16.42 16.73 16.53 17.19 17.73 17.81 18.80 18.49 18.49 18.57 19.52 20.93 19.58 19.78 19.28 18.90 18.54 18.58 18.30 18.14 18.32 18.88 19.48 18.50 18.72 19.00 18.00 17.52 18.08 18.38 18.52 6.65 6.37 6.37 6.53 6.76 6.76 6.87 7.11 6.84 7.00 7.19 7.03 7.27 6.97 6.97 6.96 6.95 6.57 6.75 6.76 6.55 6.48 6.74 6.93 6.85 7.10 7.05 7.19 6.94 6.89 6.37 6.67 6.57 6.55 6.59 6.56 9.55 9.67 19.38 19.00 19.60 18.40 19.52 18.56 18.32 19.00 19.72 21.24 20.90 20.84 20.14 22.00 24.52 23.86 24.28 23.3& 23.60 23.80 23.50 24.50 24.50 23.48 22.80 22.92 22.48 22.72 22.16 22.20 23.06 23.02 22.72 21.90 21.26 22.08 21.32 21.96 22.98 22.92 22.70 9.83 9.88 4.70 4.86 5.00 4.87 4.96 4.69 5.15 5.39 5.54 5.42 5.73 5.69 5.73 5.85 6.19 6.30 6.17 6.41 6.35 6.30 6.01 5.61 5.36 5.40 5.23 5.55 5.26 5.00 5.40 4.40 9.50 7.00 7.38 4.40 4.56 4.71 4.20 4.61 4.80 5.00 4.93 5.25 5.00 4.78 4.81 4.89 4.82 4.80 4.71 4.71 4.59 4.34 3.99 4.06 4.24 4.00 4.07 4.26 4.35 9.46 9.15 11.94 12.14 12.80 13.34 14.30 14.42 14.60 13.86 12.58 11.82 12.80 12.44 12.06 11.84 11.80 10.98 10.76 10.80 10.92 11.70 12.36 12.26 11.68 11.28 10.96 10.90 11.08 10.84 10.64 10.72 10.14 10.00 8.50 7.52 8.22 7.98 7.87 4.51 4.18 4.30 4.22 4.07 4.06 4.11 4.23 5.49 5.70 6.00 6.35 6.90 6.51 6.18 6.50 6.52 6.88 6.75 6.86 7.31 7.22 7.75 8.42 8.49 9.15 8.30 7.72 7.80 8.10 8.80 9.03 9.24 9.68 9.68 9.19 7.03 6.49 5.83 5.56 5.50 5.95 6.22 5.90 5.67 5.47 5.38 5.00 4.46 4.61 4.50 4.54 5.24 5.14 5.55 5.51 5.67 5.89 6.20 6.18 6.35 6.24 6.36 6.60 7.20 7.08 6.88 6.99 7.12 7.27 7.41 7.28 6.54 6.55 6.49 6.68 6.66 6.51 6.78 9.43 9.86 11.38 11.80 12.00 11.96 11.90 12.06 12.18 12.42 12.38 12.38 13.36 14.26 13.80 14.50 14.72 14.36 14.36 13.36 12.64 12.20 11.18 12.02 12.66 13.36 13.32 10.10 9.96 9.70 9.46 9.17 8.72 9.20 9.33 9.21 9.03 9.14 9.20 8.76 8.56 8.26 8.32 8.40 9.40 9.33 1.65 1.62 1.62 1.54 1.58 1.53 1.61 1.63 1.62 1.57 1.62 1.68 1.66 1.58 1.59 1.76 1.65 1.67 1.67 1.59 1.55 1.58 1.56 1.60 1.51 1.58 9.27 9.06 6.74 4.30 4.25 4.20 4.27 3.96 4.15 4.30 4.40 6.58 6.40 6.37 6.14 8.32 8.52 8.72 7.45 7.79 8.36 7.91 7.75 5.80 6.17 6.13 6.41 4.46 6.80 9.37 1.57