Choose 6 stocks listed on the Australian Securities Exchange (ASX). The stocks must be the component stocks of the market index S&P/ASX300 and selected at least from three industries. A list of component stocks of S&P/ASX300 will be provided. Go to the Yahoo Finance website to download 37 monthly prices for each stock from 1st April 2019 to 1st April 2022 and calculate 36 monthly returns for each stock. Be sure to choose the "adjusted close" price, as all of the necessary adjustments, such as for dividend allocations and stock splits etc. required to calculate returns have been done already. Extract the same period data for the stock market index S&P/ASX300. Alternatively, students may download the data of their stocks from any other reliable internet source. Assume that the risk-free rate (the yield of Treasury Note) is 3.0% per year in the sample period. The annual risk free rate is converted into monthly risk free rate by dividing by 12.

Calculate monthly returns, expected (average) returns and standard deviations of returns for each of the six stocks and the market index S&P/ASX300. Calculate correlation coefficients and covariance for each pair of two stock returns, each pair of a stock and the index returns and then put the results into a the matrix. The rows and columns of the matrix must be appropriately labelled. Provide comments on the risk and returns of individual stocks in comparison with market.

THE SIX COMPANIES ARE

CSL LIMITED

AMCOR LIMITED

EVOLUTION MINING LIMITED

SEVEN WEST MEDIA LIMITED

COMMONWEALTH BANK

TELSTRA CORPORATION

Establish the portfolio opportunity set that is constructed with your selected 6 stocks by using Excel Solver (The Excel_Solver_Demo will be provided in Moodle). The opportunity set will be best presented in graphical form. Broker requirements and regulatory restrictions generally prohibit short selling for the fund. As such, it is prudent to assume that short selling is impossible in this section. Highlight the efficient set and discuss where the individual stocks lie in the graph in relation to the opportunity curve and efficient set.

Recommend one portfolio (A) to the Board of Directors with appropriate explanation, i.e., why you recommend this portfolio. Your discussion should include: a. Details of the global minimum variance portfolio (including weights and dollar amounts). b. Details of the portfolios A (including weights and dollar amounts) Note: The global minimum variance portfolio and the optimal portfolio are not allowed for your recommendation (Actually, the optimal portfolio should not appear in this section)