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

K 1.63 0.27 0.89 0.94 3.1 22 1.8 Mkt-RF SMB HML 199312 1.65 1.22 199401 2.87 199402 -2.55 2.73 199403 -4.78 -0.98 199404 0.68 -0.92 199405 0.58 -2.01 199406 -3.03 -0.45 199407 2.82 -1.72 199408 4.01 1.34 199409 -2.31 2.83 199410 1.34 -2.35 199411 -4.04 0.26 199412 0.86 0.04 199501 -2.65 199502 3.63 -0.67 199503 2.19 -0.69 199504 2.11 -0.63 199505 2.9 -2.21 199506 2.93 199507 3.72 2.09 199508 0.55 1.59 199509 3.35 -2.11 199510 -1.52 -3.75 199511 3.96 -1.17 199512 1.03 0.58 199601 -2.62 199602 1.88 199603 0.73 1.31 199604 2.06 4.91 199605 2.36 3.05 199606 -1.14 -3.58 199607 -5.97 -3.84 risk-free ratlmarket retum MKT 0.57 0.23 1.88 2.09 0.25 3.12 -1.45 0.21 -2.34 1.29 0.27 -4.51 1.68 0.95 0.2 0.31 1.69 0.31 -2.72 0.62 0.28 3.1 -2.81 0.37 4.38 -1.91 0.37 -1.94 -1.74 0.38 1.72 -0.94 0.37 -3.67 0.54 0.44 1.3 0.81 0.42 2.22 1.09 0.4 4.03 -1.1 0.46 2.65 2.27 0.44 2.55 1.72 0.54 3.44 -2.28 0.47 3.19 -1.67 0.45 4.17 2.71 0.47 1.02 -0.75 0.43 3.78 -0.74 0.47 -1.05 0.95 0.42 4.38 0.87 0.49 1.52 0.3 0.43 2.69 -1.42 0.39 1.72 1.01 0.39 1.12 -3.91 0.46 0.42 2.78 1.56 0.4 -0.74 4.45 0.45 -5.52 Average Value Weighted Returns -- Monthly Food Beer Smoke 199312 -0.07 4.24 -0.93 199401 1.71 -4.93 10.13 199402 -2.15 -7.13 199403 -4.28 -3.17 - 10.99 199404 1.83 11.26 199405 -0.7 -2.17 -6.79 199406 0.85 -4.58 199407 2.42 5.49 5,53 199408 7.48 5.17 9.78 199409 0.23 2.49 -2.82 199410 3.74 -2.42 199411 -2.03 0.87 -1.99 199412 1.51 1.9 -2.04 199501 2.4 2.84 4.59 199502 1.34 4.87 - 1.24 199503 3.58 2.4 5.91 199504 3.81 3.23 -4.35 199505 3.16 8.42 3.92 199506 2.71 -0.13 -0.92 199507 -0.58 2.39 -3.47 199508 1.35 -1.63 4.57 199509 8.04 9.26 2.89 199510 -0.04 3.93 2.79 199511 3.95 4.86 2.93 199512 3.44 -0.8 4.99 199601 3.42 3.26 1.82 199602 1.62 5.61 3.18 199603 -3.82 1.9 -7.68 199604 -0.32 -0.89 -1.6 199605 5.5 9.69 5.48 199606 2.38 6.54 3.68 2.72 2.26 1.33 2.52 . -12 K 1.63 0.27 0.89 0.94 3.1 22 1.8 Mkt-RF SMB HML 199312 1.65 1.22 199401 2.87 199402 -2.55 2.73 199403 -4.78 -0.98 199404 0.68 -0.92 199405 0.58 -2.01 199406 -3.03 -0.45 199407 2.82 -1.72 199408 4.01 1.34 199409 -2.31 2.83 199410 1.34 -2.35 199411 -4.04 0.26 199412 0.86 0.04 199501 -2.65 199502 3.63 -0.67 199503 2.19 -0.69 199504 2.11 -0.63 199505 2.9 -2.21 199506 2.93 199507 3.72 2.09 199508 0.55 1.59 199509 3.35 -2.11 199510 -1.52 -3.75 199511 3.96 -1.17 199512 1.03 0.58 199601 -2.62 199602 1.88 199603 0.73 1.31 199604 2.06 4.91 199605 2.36 3.05 199606 -1.14 -3.58 199607 -5.97 -3.84 risk-free ratlmarket retum MKT 0.57 0.23 1.88 2.09 0.25 3.12 -1.45 0.21 -2.34 1.29 0.27 -4.51 1.68 0.95 0.2 0.31 1.69 0.31 -2.72 0.62 0.28 3.1 -2.81 0.37 4.38 -1.91 0.37 -1.94 -1.74 0.38 1.72 -0.94 0.37 -3.67 0.54 0.44 1.3 0.81 0.42 2.22 1.09 0.4 4.03 -1.1 0.46 2.65 2.27 0.44 2.55 1.72 0.54 3.44 -2.28 0.47 3.19 -1.67 0.45 4.17 2.71 0.47 1.02 -0.75 0.43 3.78 -0.74 0.47 -1.05 0.95 0.42 4.38 0.87 0.49 1.52 0.3 0.43 2.69 -1.42 0.39 1.72 1.01 0.39 1.12 -3.91 0.46 0.42 2.78 1.56 0.4 -0.74 4.45 0.45 -5.52 Average Value Weighted Returns -- Monthly Food Beer Smoke 199312 -0.07 4.24 -0.93 199401 1.71 -4.93 10.13 199402 -2.15 -7.13 199403 -4.28 -3.17 - 10.99 199404 1.83 11.26 199405 -0.7 -2.17 -6.79 199406 0.85 -4.58 199407 2.42 5.49 5,53 199408 7.48 5.17 9.78 199409 0.23 2.49 -2.82 199410 3.74 -2.42 199411 -2.03 0.87 -1.99 199412 1.51 1.9 -2.04 199501 2.4 2.84 4.59 199502 1.34 4.87 - 1.24 199503 3.58 2.4 5.91 199504 3.81 3.23 -4.35 199505 3.16 8.42 3.92 199506 2.71 -0.13 -0.92 199507 -0.58 2.39 -3.47 199508 1.35 -1.63 4.57 199509 8.04 9.26 2.89 199510 -0.04 3.93 2.79 199511 3.95 4.86 2.93 199512 3.44 -0.8 4.99 199601 3.42 3.26 1.82 199602 1.62 5.61 3.18 199603 -3.82 1.9 -7.68 199604 -0.32 -0.89 -1.6 199605 5.5 9.69 5.48 199606 2.38 6.54 3.68 2.72 2.26 1.33 2.52 . -12