Choose three publicly traded stocks and download the last five years of monthly stock price data from
Question:
Choose three publicly traded stocks and download the last five years of monthly stock price data from Yahoo Finance. You can download the 1-Month Treasury Constant Maturity Rate available on the St. Louis Federal Reserve Bank website as the risk-free rate. When downloading the data, use Monthly as the Frequency and End of Period as the Aggregation Method. You can adjust the date range to suit your needs.
Note about the 1-Month Treasury Constant Maturity Rate data:
The first column shows the month in year-month-day format. Ignore the day from this date. So, think of 2014-12-01 as 2014-12 or December 2014. Second, the number shown is in percent per year (without the % sign). For your calculations, you will need monthly returns in decimals. So, divide the number by 100 to convert the percent value into decimal. The returns are annualized in the bond market using the simple interest convention. So, we need to divide by 12 to get the monthly return.
Calculate the following:
- The optimal allocation among three stocks
- The optimal allocation of the combined portfolio of the portfolio of three stocks and a one-month T-bill
- The Sharpe Ratio of this combined portfolio
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank