Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

This is complete write up of your portfolio formation in a Word file, with calculations copied and pasted in it from your Excel file. 1.

This is complete write up of your portfolio formation in a Word file, with calculations copied and pasted in it from your Excel file.

1. Select the stocks of three publicly traded companies from different industries. State the criteria for selecting those securities.

2. Retrieve monthly data on adjusted closing prices of your securities from Yahoo Finance for the past 10 years and calculate the monthly rate of return of the stocks for every month.

3. Calculate the mean, variance, and standard deviation of the stocks monthly returns.

4. Calculate the correlation coefficient between every possible pair of stocks returns.

5. Decide what percentage of your money (weights) you want to invest in each stock and state the criteria you used to select those weights.

6. Now calculate your portfolios mean monthly return, variance, and standard deviation.

7. Assuming your portfolio return follows a normal distribution, calculate the chance that your portfolio loses 10% of its value during any month?

8. Assuming you have invested $100,000 in your portfolio, what is value at risk (VaR) of your portfolio at any particular month at 99% confidence level?

9. Now randomly change your portfolios weights 100 times (note total weights should always be 100%), for each weight combination calculate the mean and standard deviation of your portfolio, and then draw the efficient frontier.

10. For each item mentioned above explain your rationale and cite peer-reviewed and/or seminal sources.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Real Estate Finance

Authors: David Sirota, Doris Barrell

14th Edition

1475428391, 9781475428391

More Books

Students also viewed these Finance questions