Equity Portfolio Management Professor Garvey Theory of Finance Portfolio Project Due Date: April 20, 2021 Project Must Be Completed Individually Step 1 – Data (Tab 1 of your spreadsheet) Select seven...

Complete a portfolio and report on how the portfolio was done


Equity Portfolio Management Professor Garvey Theory of Finance Portfolio Project Due Date: April 20, 2021 Project Must Be Completed Individually Step 1 – Data (Tab 1 of your spreadsheet) Select seven exchange-traded funds (ETFs) from Blackrock http://www.ishares.com/us. Be sure to let me know (in your write-up) the name/ticker symbol of each ETF. Obtain historical pricing data and compile monthly (at least 60) excess returns for each ETF. The pricing data is available free on Internet sites (e.g., Yahoo Finance http://finance.yahoo.com/) or by using a Bloomberg terminal on campus. Be sure to let me know where you obtained the data. Create your (Tab 1) spreadsheet with the seven columns of monthly risky asset excess returns and the risk-free asset return. Your spreadsheet should also include a correlation and covariance matrix between the risky assets. ***3 extra credit points for test 1 – due April 1, 2021 Step 2 – Create the optimal risky portfolio using Solver (Tab 2 of your spreadsheet) Follow Chapter 7 Appendix A • Use average excess return of entire series (step 1) for Expected excess return Determine the weights, mean, standard deviation and slope for the minimum variance portfolio, optimal risky portfolio, and eight other portfolios that lie on the efficient frontier. Your report should include (within the text): • A correlation matrix • A covariance matrix • A table with the weights, means, standard deviations, and Sharpe ratios (i.e., reward-to- volatility ratio) for the ten portfolios that lie on the efficient frontier • The risk premium along the CAL for the ten portfolios • A graph of the efficient frontier and CAL Step 3 – Capital allocation to the risk-free asset (using Y* formula) Determine your coefficient of risk aversion and new portfolio weights. In your report, provide your Y* calculation and mean/standard deviation of complete portfolio. Step 4 – Report Your write-up should describe the steps taken above to form the complete portfolio. Include Tab 1 and Tab 2 Excel information at the end of your report but include summary results in your write-up. If you are not able to complete Step 2, then use the same Expected excess returns (and covariance matrix) in Chapter 7 Appendix. However, you must select eight different portfolios on the efficient frontier and still show me (explain) your original Step 1 results. http://www.ishares.com/us http://finance.yahoo.com/