Comment on both the realised risk and return of the portfolios. You

should provide a brief discussion about the models including assumptions

and the economic rationale for the chosen factors?HML,SMB and rm-rf?, but this does not need to

be too in depth. Results should be presented in tables/gures to make for

ecient reading. You should also attempt to provide some justication for

the results you find.

(ps: The return is value weighted. The risk free rate is one year rate. 2pageplease)

FINC6009 Portfolio Theory and Applications Individual Assignment Due Date: 22nd September, 2017 by 5pm Task Description: You are a junior analyst working at a large active fund manager. You manager is interested in examining how different assumptions about the returns generating process can affect portfolio outcomes. To this end, you have been asked to conduct a preliminary study to examine the historical outcomes of portfolios built using three different models. Specifically, you will need to construct the global minimum variance portfolio and the tangency portfolio assuming: Returns are normally distributed but no model is specified. Returns are generated according to a single factor model where the relevant factor is the return on a market portfolio. Returns are generated according to the Fama-French three factor model. You are to provide some detail about these models and the form for the covariance matrix and expected return vector that result when they are employed. Your portoflios are to be constructed from the 30 industry portfolios found on the Ken French Data Library.1 You should construct your portfolios using 2 years of daily return data starting in January 2014. You are to examine the daily returns of your portfolio over a one year period (starting in January 2016) where each of the portfolios is rebalanced quarterly. Rebalancing will require an update of the covariance/expected return estimates and these should continue to be calculated over 2 years of data. You are to write a report of no more than 2 pages outlining what you have done and what you have found. Be sure to comment on both the realised 1 See http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/ 1 risk and return of the portfolios. Your report should be clear and concise. This is a preliminary study so no extensive literature review is required. You should provide a brief discussion about the models including assumptions and the economic rationale for the chosen factors, but this does not need to be too in depth. Results should be presented in tables/figures to make for efficient reading. You should also attempt to provide some justification for the results you find. 2 average GMVP historical sim 0.000455353 4.05476E-05 average Tangency portfolio 0.003872395 0.002307779 ff 0.00024678 3 -0.00532491