This exercise will involve constructing a portfolio for a collection of securities traded in ADSE. You will need to download the spreadsheet entitled “Case Study Stock Prices.xls” from the course website.
Obtain expected returns, standard deviations, and correlations for the two stocks that will be used as input into the portfolio optimization procedure. Calculating the average returns, standard deviations, covariance and correlations from the historical data, answer the following:
1. What are the expected return and standard deviation of the portfolio consisting of 70% of the first stock and 30% of the second stock?
2. What is the beta of the portfolio in part (1) (using the ADX GENERAL – PRICE INDEX).
3. Use Excel’s solver to find the composition of a portfolio that minimizes the variance of the portfolio. What is the expected return on the minimum variance portfolio?
4. Graph the efficient frontier portfolio.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]