In this assignment, you will apply the different portfolio optimization approaches we discussed in class. The context in which you will apply these approaches will be international equity investing. Data Specifically, the excel spreadsheet International_Equity_Indexes.xlsx contains monthly returns of value-weighted equity indexes divided into four regions: North America Canada and the United states. Japan. Asia Pacific Australia, Hong Kong, New Zealand, and Singapore. Europe Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. In addition, the file contains the Global Index returns (encompassing Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Switzerland, Sweden, United Kingdom, United States). All reported returns are excess returns (net of the US 1-month risk free-rate), in US dollar terms. In addition, the file contains the 1-month US risk-free rate. SR refers to Sharpe Ratio. Questions On a single chart, plot the value of $1 invested in each of the five indexes over time. i.e., for all t, plot the cumulative return series for each index: TVt =(1+r1)(1+r2)(1+rt) What patterns do you observe? Draw the mean-variance frontier using the four equity indexes (4 region indexes excluding global index) assuming short-selling is allowed. (Fix the range of the mean as [0.2%,1%].) (III-VI) Imagine that you are an investor on Jan 1st, 2002, and using the historical data up to that date: Assume that the Global index cannot be included in your portfolio. What are the weights on the maximum SR portfolio assuming short-selling is allowed? if you applied these weights to your portfolio, what would the SR of your portfolio be over the next 12 years (out-of-sample test)? (i.e, find the optimal portfolio weights during 1990-2001 and check the portfolio performance during 2002-2013 using the same weights you find previously) What are the weights on the maximum SR portfolio assuming short-selling is NOT allowed? if you applied these weights to your portfolio, what would the SR of your portfolio be over the next 12 years? What are the weights on the minimum global variance portfolio? if you applied these weights to your portfolio, what would the SR of your portfolio be over the next 12 years? Imagine that you are a portfolio manager in charge of global asset allocation. Write a short executive summary directed to the CIO discussing these approaches, their performance, and your recommendation for global asset allocation.