iLab: Markowitz Portfolio Optimisation Exercise FINS5513: 2020 Term 3 Individualised Assignment for z5221167 Instructions You are evaluating a portfolio of U.S. equities. The five unique, randomly...

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iLab: Markowitz Portfolio Optimisation Exercise FINS5513: 2020 Term 3 Individualised Assignment for z5221167 Instructions You are evaluating a portfolio of U.S. equities. The five unique, randomly drawn stocks in your portfolio have the FactSet identifiers (i) APH-US, (ii) GIS-US, (iii) JEF-US, (iv) NLSN-US, and (v) TRV-US. For the period from Jan 2014 through Dec 2018, download the monthly returns for each stock in your portfolio from FactSet (60 observations). All returns should be ”total returns” inclusive of dividends. You should use a risk-free rate of 3.00% APR for this analysis. Unless otherwise specified, report your answers as decimals rounded to the nearest 0.0001. For example, if you believe the correct answer is 5.23%, you should write 0.0523. Data Validation Before proceeding, we will first verify that you have downloaded the correct data for your assigned companies and that you are able to correctly compute some basic statistics. Given that you can annualize a monthly average return by simply multiplying it by 12, what is the average annualised return... 1. ...for APH-US? (Hint: 0.13XX) 2. ...for GIS-US? (Hint: -0.0026XX) 3. ...for JEF-US? (Hint: -0.058XX) 4. ...for NLSN-US? (Hint: -0.076XX) 5. ...for TRV-US? (Hint: 0.093XX) Given that you can annualize your monthly standard deviation by simply multiplying it by √ 12, what is the annualised standard deviation of returns for... 6. ... APH-US? (Hint: 0.13XX) 7. ... GIS-US? (Hint: 0.16XX) 8. ... JEF-US? (Hint: 0.22XX) 9. ... NLSN-US? (Hint: 0.23XX) 1 10. ... TRV-US? (Hint: 0.17XX) As with average returns, the covariance of monthly returns is also annualised by simply multiplying by 12. What is the annualised covariance of monthly returns between... 11. ... APH-US and GIS-US? (Hint: 0.0077XX) 12. ... JEF-US and NLSN-US? (Hint: 0.012XX) 13. ... APH-US and TRV-US? (Hint: 0.012XX) Efficient Frontier Use the Solver tool in Microsoft Excel to define the Minimum Variance Frontier. That is, for a portfolio constructed of your assigned securities, find the weights of each asset that would minimize the standard devia- tion/variance of the portfolio. Do this for each expected annual portfolio return level between 0% and 30% (in increments of 5%). What is the minimum attainable standard deviation of annual returns for ... 14. ... an expected return level of 0%? 15. ... an expected return level of 5%? 16. ... an expected return level of 10%? 17. ... an expected return level of 15%? 18. ... an expected return level of 20%? 19. ... an expected return level of 25%? 20. ... an expected return level of 30%? Calculate the portfolio weightings for the Global Minimum Variance Portfolio (GMVP) by using Excel Solver to find the portfolio with minimum variance (without any constraint on expected portfolio return). What is portfolio weight in ... 21. ... APH-US? 22. ... GIS-US? 23. ... JEF-US? 24. ... NLSN-US? 25. ... TRV-US? Compute the annualised expected return and annualised standard deviation of the Global Minimum Variance Portfolio (GMVP). What is its ... 26. ... annualised expected return? 27. ... annualised standard deviation? 2 Capital Allocation Line The Optimal Risky Portfolio (P ∗) is the point on the Efficient Frontier that has the highest possible Sharpe Ratio. Using the risk-free rate provided earlier, calculate the weight of each stock in this Optimal Risky Portfolio (P ∗). What is the portfolio weight in P ∗ of ... 28. ... APH-US? 29. ... GIS-US? 30. ... JEF-US? 31. ... NLSN-US? 32. ... TRV-US? Compute the annualised expected return and annualised standard deviation for P ∗. What is its ... 33. ... annualised expected return? 34. ... annualised standard deviation? Optimal Complete Portfolio Under risk aversion, assume the allocation to risky assets y* for an investor is given by y∗ = E(rp)− rf Aσ2P 35. What is the risk aversion coefficient, A, for Investor I, who is 100% invested in the optimal risky portfolio? (Report your answer to 2 decimal places eg 1.63) 36. Investor J has a risk aversion coefficient equal to 1.5 times that of investor I. What is investor J’s optimal allocation to risky assets y*? Compute investor J’s Optimal Complete Portfolio (C). This portfolio is invested in the optimal risky portfolio and the risk-free asset. 37. What is the annualised expected return for investor J’s Optimal Complete Portfolio? 38. What is the annualised standard deviation for investor J’s Optimal Complete Portfolio? 39. Using quadratic utility, U = E(rp) − 12Aσ 2 p, what is the utility score for investor J’s Optimal Complete Portfolio? 3 Instructions Data Validation Efficient Frontier Capital Allocation Line Optimal Complete Portfolio
ilab1-hdf5p1xg.pdf
Answered Same DayOct 19, 2021

Answer To: iLab: Markowitz Portfolio Optimisation Exercise FINS5513: 2020 Term 3 Individualised Assignment for...

Sweety answered on Oct 26 2021
145 Votes
ANSWER SUMMARY
        SOLUTION SUMMARY
        QUESTION NO.    SOLUTION
        1    -0.07
        2    -0.06
        3    0.09
        4    -0.00
        5    0.14
        6    13.95
        7    26.44
        8    9.13
        9    17.95
        10    14.37
        11    151.77562
        12    129.162
        13    93.34284
        14    0
        15    5.5
        16    19
        17    44
        18    76
        19    21
        20    21
        21    0.20
        22    0.35
        23    0.05
        24    0.15
        25    0.25
        26    -4.8125
        27    16
        28    0.25
        29    0.25
        30    0.1
        31    0.2
        32    0.2
        33    -1.1055
        34    15.39
        35    0.1636
        36    0.2455
        37    -1.1055
        38    15.39
        39    -178.744575
NLSN (US)
    COMPANY NAME NLSN (US)
    STATEMENT SHOWING GROSS RETURN & MONTHLY RETURN (%)                STATEMENT SHOWING EXPECTED RETURN & STANDARD DEVIATION
    Date    Total Return (Gross)    RETURN %        YEAR    AVERAGE ANNUAL RETURN    (ACTUAL RETURN LESS EXPECTED RETURN)    (AR LESS ER )*(AR LESS ER)
    12/31/13    46.83            2014    1%    8.00    64.00
    01/31/14    43.15    -0.08        2015    7%    14.00    196.00
    02/28/14    48.30    0.12        2016    -1%    6.00    36.00
    03/31/14    45.73    -0.05        2017    -8%    -1.00    1.00
    04/30/14    48.11    0.05        2018    -33%    -26.00    676.00
    05/30/14    49.45    0.03            -33%        973.00
    06/30/14    49.87    0.01
    07/31/14    47.50    -0.05
    08/29/14    48.67    0.02            EXPECTED RETURN    -0.07
    09/30/14    45.91    -0.06            STANDARD DEVIATION    13.95
    10/31/14    44.01    -0.04
    11/28/14    43.52    -0.01
    12/31/14    46.61    0.07
    01/30/15    45.39    -0.03
    02/27/15    47.11    0.04
    03/31/15    46.70    -0.01
    04/30/15    47.09    0.01
    05/29/15    47.14    0.00
    06/30/15    47.20    0.00
    07/31/15    51.09    0.08
    08/31/15    48.00    -0.06
    09/30/15    47.19    -0.02
    10/30/15    50.42    0.07
    11/30/15    49.83    -0.01
    12/31/15    49.74    -0.00
    01/29/16    51.41    0.03
    02/29/16    53.74    0.05
    03/31/16    56.52    0.05
    04/29/16    55.96    -0.01
    05/31/16    57.64    0.03
    06/30/16    56.11    -0.03
    07/29/16    58.15    0.04
    08/31/16    57.86    -0.00
    09/30/16    58.17    0.01
    10/31/16    48.89    -0.16
    11/30/16    47.14    -0.04
    12/30/16    45.89    -0.03
    01/31/17    44.75    -0.02
    02/28/17    48.86    0.09
    03/31/17    45.50    -0.07
    04/28/17    45.30    -0.00
    05/31/17    42.76    -0.06
    06/30/17    42.96    0.00
    07/31/17    47.79    0.11
    08/31/17    43.54    -0.09
    09/29/17    46.45    0.07
    10/31/17    41.54    -0.11
    11/30/17    41.54    -0.00
    12/29/17    41.18    -0.01
    01/31/18    42.32    0.03
    02/28/18    36.92    -0.13
    03/29/18    36.33    -0.02
    04/30/18    35.94    -0.01
    05/31/18    34.48    -0.04
    06/29/18    35.76    0.04
    07/31/18    27.24    -0.24
    08/31/18    30.47    0.12
    09/28/18    32.41    0.06
    10/31/18    30.44    -0.06
    11/30/18    32.28    0.06
    12/31/18    27.72    -0.14
JEF (US)
    COMPANY NAME JEF (US)
    STATEMENT SHOWING GROSS RETURN & MONTHLY RETURN (%)                STATEMENT SHOWING EXPECTED RETURN & STANDARD DEVIATION
    Date    Total Return (Gross)    RETURN %        YEAR    AVERAGE ANNUAL RETURN    (ACTUAL RETURN LESS EXPECTED RETURN)    (AR LESS ER )*(AR LESS ER)
    12/31/13    26.77            2014    -22%    -16.19    262.12
    01/31/14    25.81    -0.04        2015    -22%    -16.19    262.12
    02/28/14    26.39    0.02        2016    34%    39.81    1,584.84
    03/31/14    26.51    0.00        2017    16%    21.81    475.68
    04/30/14    24.16    -0.09        2018    -36%    -30.19    911.44
    05/30/14    24.28    0.01            -29%        3,496.18
    06/30/14    24.88    0.02
    07/31/14    23.45    -0.06
    08/29/14    23.66    0.01            EXPECTED RETURN    -0.058
    09/30/14    22.68    -0.04            STANDARD...
SOLUTION.PDF
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