Assume that you need to find out a portfolio to invest but you are only given a
Question:
Assume that you need to find out a portfolio to invest but you are only given a short time to do your research and find a suitable portfolio. Therefore, you need to do the following: (1) Pick up 10 firms from FTSE100 and download these firms’ daily share prices over the most recent 3-month. (5 marks)
(2) Use these prices to calculate (by using EXCEL) these firms’ mean log returns and log returns’ variances. (5 marks)
(3) After that, use the information of returns and variances to choose 5 firms that you believe to be “good choices” in forming your own investment portfolio (Multiple methods are suggested to be used in analysing relevant data and information). Discuss why you choose these 5 firms. (10 marks)
(4) Use EXCEL to calculate covariance and correlations of these 5 firms (assume that they are equally weighted). Explain what is covariance and correlation and explain your results. (10 marks)
(5) Use EXCEL’s MMULT function (plus TRANSPOSE function) to calculate your portfolio’s mean log return and standard deviation of log returns. (5 marks).
(6) Now use proper method to select two stocks out of the five, and demonstrate the selection of the minimum variance portfolio in Excel. Plot the efficient frontier in Excel graph (10 marks).
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella