Question
You are asked to create an optimal minimum variance portfolio using three stocks (FB, TSLA, BA). Find optimal weights for the minimum variance portfolio satisfying
You are asked to create an optimal minimum variance portfolio using three stocks (FB, TSLA, BA). Find optimal weights for the minimum variance portfolio satisfying the following condition:
where w1 is an weight allocated to FB, w2 is an weight allocated to TSLA, and w3 is an weight allocated to BA. The average returns for FB, TSLA, BA are -0.28%, 0.99%, -0.39%, respectively. The covariance matrix is given by
FB | TSLA | BA | |
FB | 0.04% | 0.04% | 0.02% |
TSLA | 0.04% | 0.41% | 0.02% |
BA | 0.02% | 0.02% | 0.04% |
1. The optimal weight for FB is _________ %. (Note: round to the nearest hundredth.)
2. The optimal weight for TSLA is ________ %. (Note: round to the nearest hundredth.)
3. The optimal weight for BA is __________ %. (Note: round to the nearest hundredth.)
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