Portfolio 1: 1/N strategy, i.e., 1/5 weight on each of the five assets.

2---Portfolio 2: implement the maximum utility strategy by investing in all five assets

using a degree of relative risk aversion equal to 2. In your analysis, treat RF as the

riskless asset and the remaining four assets as risky. Therefore, assume that RF has

zero variance.

o Portfolio 3: implement the same maximum utility strategy as in Portfolio 2 but now

set the degree of relative risk aversion to be equal to 6.

o Portfolio 4: implement the maximum return strategy by investing in all five assets

using a target annualized portfolio volatility of 10%.

o Portfolio 5: implement the same maximum return strategy by investing in all five

assets but now set a target annualized portfolio volatility of 20%.

For portfolios 2, 3, 4 and 5 the weight on each of the four risky assets should be constrained

to be between 0 and 1.5. Hence no short selling and no more than 50% leverage. The way

to impose this is simple: solve for the optimal weights on the risky assets and if they are

outside the bounds, then impose the bound. For example, if the optimal weight is -2, set it

to 0, or if it is +2, set it to 1.5. Once you impose the constraints, you will need to adjust the

weight on the riskless asset so that the adjusted weights sum up to 1. There is no constraint

on the weight of the riskless asset. If you adjust the weights, make sure to show the values

of the weights before and after the adjustment.

---One of the five assets will be the risk-free rate. you will see a column labelled RF.

---The second asset will be the market portfolio. you will see a column labelled Mkt-RF.

This gives you the market excess return. You will need to compute just the Mkt return as

(Mkt-RF)+RF.

----The next three assets must be industry portfolios. Go to the file called "30 industry

portfolios" and you may choose any 3 industry portfolios.

I have data in the pictureplease teach me how to generate the monthly returns for five portfolios

Market Portfolio Food 8.7 Beer 16.41 6.12 -6.72 8.85 -5.67 -8.29 Smokes -24.93 3.52 - 10.15 -8.62 -4.01 5.11 3.79 19.51 2.96 -4.39 19.03 0.87 22.8 Monthly Data Date 199910 199911 199912 200001 200002 200003 200004 200005 200006 200007 200008 200009 200010 200011 200012 200101 200102 200103 200104 200105 200106 200107 200108 200109 200110 200111 200112 200201 200202 4.07 Risk-Free 0.39 0.36 0.44 0.41 0.43 0.47 0.46 0.5 0.4 0.48 0.5 0.51 0.56 0.51 0.5 0.54 0.38 0.42 0.39 0.32 0.28 0.3 0.31 0.28 0.22 0.17 0.15 0.14 0.13 3.37 7.72 -4.74 2.45 5.2 -6.4 -4.42 4.64 -2.51 7.03 -5.45 -2.76 -10.72 1.19 3.13 -10.05 -7.26 7.94 0.72 -1.94 -2.13 -6.46 -9.25 2.46 7.54 1.61 -1.44 -2.29 -6.89 9.69 -3.9 15.65 2.34 -0.88 -2.66 4.9 6.07 4.44 5.51 -4.17 1.3 -3.36 -1.73 2.61 -0.87 3.37 3.22 0.45 1.25 0.6 2.61 2.41 1.91 -8.83 -2.28 -11.64 0.13 3.68 11.87 6.05 6.57 -10.83 5.46 8.99 4.2 -2.57 -4.75 -6.25 -9.39 -2.2 4.71 -4.94 0.8 6.1 -3.22 1.34 0.01 1.62 -3.76 8.14 16.96 0.07 9.47 -0.14 5.67 2.25 -0.57 -9.19 4.66 2.92 -2.82 1.19 -1.72 8.45 5.04 Total Return 7 Monthly Table 8 Mean 9 Standard Deviation 0.137916667 0.507541667 0.774541667 0.862708333 4.188779263 1.317666667 6.766669265 1 Annual Table 2 Mean 3 Standard Deviation 4 Sharpe Ratio 1.655 1.362639944 6.0905 7.249556732 9.2945 .607112389 10.3525 7.089806144 15.812 9.011105991 6 6 Covariance Matrix Food Beer Smokes Market Portfolio Food Beer Market Portfolio 19.10161021 8.461015748 7.068734575 8.616330097 13.17865062 9.7532377 11.88429518 17.47276391 9.277220903 Smokes 45.59703039 2 Correlation Matrix Market Portfolio Food Beer Smokes 0 000 u AwN- Market Portfolio Food Beer Smokes 0.533276004 0.386924189 0.291957113 0.642735861 0.484807889 0.328676621 Market Portfolio Food 8.7 Beer 16.41 6.12 -6.72 8.85 -5.67 -8.29 Smokes -24.93 3.52 - 10.15 -8.62 -4.01 5.11 3.79 19.51 2.96 -4.39 19.03 0.87 22.8 Monthly Data Date 199910 199911 199912 200001 200002 200003 200004 200005 200006 200007 200008 200009 200010 200011 200012 200101 200102 200103 200104 200105 200106 200107 200108 200109 200110 200111 200112 200201 200202 4.07 Risk-Free 0.39 0.36 0.44 0.41 0.43 0.47 0.46 0.5 0.4 0.48 0.5 0.51 0.56 0.51 0.5 0.54 0.38 0.42 0.39 0.32 0.28 0.3 0.31 0.28 0.22 0.17 0.15 0.14 0.13 3.37 7.72 -4.74 2.45 5.2 -6.4 -4.42 4.64 -2.51 7.03 -5.45 -2.76 -10.72 1.19 3.13 -10.05 -7.26 7.94 0.72 -1.94 -2.13 -6.46 -9.25 2.46 7.54 1.61 -1.44 -2.29 -6.89 9.69 -3.9 15.65 2.34 -0.88 -2.66 4.9 6.07 4.44 5.51 -4.17 1.3 -3.36 -1.73 2.61 -0.87 3.37 3.22 0.45 1.25 0.6 2.61 2.41 1.91 -8.83 -2.28 -11.64 0.13 3.68 11.87 6.05 6.57 -10.83 5.46 8.99 4.2 -2.57 -4.75 -6.25 -9.39 -2.2 4.71 -4.94 0.8 6.1 -3.22 1.34 0.01 1.62 -3.76 8.14 16.96 0.07 9.47 -0.14 5.67 2.25 -0.57 -9.19 4.66 2.92 -2.82 1.19 -1.72 8.45 5.04 Total Return 7 Monthly Table 8 Mean 9 Standard Deviation 0.137916667 0.507541667 0.774541667 0.862708333 4.188779263 1.317666667 6.766669265 1 Annual Table 2 Mean 3 Standard Deviation 4 Sharpe Ratio 1.655 1.362639944 6.0905 7.249556732 9.2945 .607112389 10.3525 7.089806144 15.812 9.011105991 6 6 Covariance Matrix Food Beer Smokes Market Portfolio Food Beer Market Portfolio 19.10161021 8.461015748 7.068734575 8.616330097 13.17865062 9.7532377 11.88429518 17.47276391 9.277220903 Smokes 45.59703039 2 Correlation Matrix Market Portfolio Food Beer Smokes 0 000 u AwN- Market Portfolio Food Beer Smokes 0.533276004 0.386924189 0.291957113 0.642735861 0.484807889 0.328676621