Homework #3 : A group research task Choose 10 stocks you would like to analyze, at least 30 monthly observations, and download historical prices 2. Calculate the historical average returns, standard deviations and correlations 3. Build a covariance matrix 4. Look up the one-month interest rate from Treasury bill quotes (make sure you convert to monthly) 5. Find the weights in the tangency portfolio of these 10 stocks 1. You may use matrix calculations, or Excel's built-in Solver capability 2. If you use the Solver, let the weights be set freely to maximize the Sharpe ratio 6. Find the implied betas, using the tangency portfolio as the "market" 7. Also estimate historical betas using the S\&P 500 as the "market" 1. You can use SPX or SPY as proxies for the S\&P 500 2. Using the market risk premium of 6%, calculate expected returns with the CAPM 8. Discuss your results Homework #3 : A group research task Choose 10 stocks you would like to analyze, at least 30 monthly observations, and download historical prices 2. Calculate the historical average returns, standard deviations and correlations 3. Build a covariance matrix 4. Look up the one-month interest rate from Treasury bill quotes (make sure you convert to monthly) 5. Find the weights in the tangency portfolio of these 10 stocks 1. You may use matrix calculations, or Excel's built-in Solver capability 2. If you use the Solver, let the weights be set freely to maximize the Sharpe ratio 6. Find the implied betas, using the tangency portfolio as the "market" 7. Also estimate historical betas using the S\&P 500 as the "market" 1. You can use SPX or SPY as proxies for the S\&P 500 2. Using the market risk premium of 6%, calculate expected returns with the CAPM 8. Discuss your results