Collect monthly prices for 7 (seven) stocks/assets of your choice for the last 10 (ten) years traded in a market (of your choice). Use the data to construct one portfolio (i.e. same stocks/assets). However, use it to generate three objectives/scenarios the first is to maximise returns, the second is to minimise risk and the third is to maximise sharp ratio. Use the Excel solver to optimise the portfolio weights and the constraint option so no asset should have zero weight - No short-selling is allowed (No negative weights). Report the annualised expected returns and risks of the three objectives/scenarios and any other necessary performance indicators. Report the weighted average portfolio-beta for each objective/scenario. Use available data that can be easily obtained online. Use dividend adjusted close prices

 

Section 1: 

1. Utilise your knowledge of the underlying theories, assumptions and limitations of various asset pricing models including and not limited to: Capital Asset Pricing Model (CAPM); Arbitrage Pricing Theory (APT); Multifactor Models etc.

2. Utilise argument and findings from the recent development in the literature to support your discussions. 

 

1. Use the knowledge gained from Transferable Skills documents on blackboard namely Portfolio and CAPM. These two documents and accompanied Excel files will help guide you to optimise portfolio weights and estimate assets' beta using CAPM or Market model by employing regression analysis and other functions in Excel. 

 

2. Calculate each stock variance and standard deviation using Excel 

 

3. Use the SOLVER functions in Excel to maximise (minimise) portfolio return and sharp ratio (risk) 

 

4. Present the work in a professional investment report and provide comments on the results.

 

 5. Provide sufficient justification for the choice of stocks/assets in your portfolio and the market portfolio. 

 

6. Make sure to collect stock/asset prices that are dividends adjusted. 

 

7. Provide sufficient justification on the choice of the proxy (index) of the market portfolio. 

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Investment Portfolio Optimization Report Section 1 Theoretical Framework 1 Capital Asset Pricing Model CAPM a CAPM is a widely used model for estimating the expected return on an asset It relates the ... View the full answer