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STOCKS PORTFOLIOS Global Minimum Global Minimum Tangency Tangency Variance Portfolio Variance Portfolio Portfolio Portfolio Normal Portfolio No short sales Short sales allowed No short sales Short sales allowed A B C (Q1-Q2) (Q3-a) (Q3-b) Q4-a) (04-b) Expected return ? ? ? ? ? ? ? Standard deviation ? ? ? ? 1.3 ? ? Coefficient of variation ? ? ? ? ? . 3 .3 .3 ? ? Sharpe Ratio ?CASE STUDY CASE: Suppose that you are about to construct a portfolio of three risky assets, Stock A, Stock B, and Stock C. You have 100.000 TL of capital to invest. Relevant data regarding these stocks are presented as follows: Variance Investment amount A 20% 3,24% 30.000 TL B 25% 1,44% 40.000 TL 0.25% moon A B C A 100% B 65% C 55% 75% 100% INSTRUCTIONS Q1: Find the portfolio expected return. Q2: Find the portfolio risk (standard deviation) by means of MATRIX ALGEBRA Q3: Calculate the relevant weights that enable you to construct the global minimum variance portfolio under the assumption of a. no short-selling is allowed (i.e. weights must be positive). b. short-selling is allowed (i.e. weights can be negative). Q4: Suppose that risk-free rate is 4%. Calculate the relevant weights that enable you to construct the tangency (market) portfolio under the assumption of c. no short-selling is allowed (i.e. weights must be positive). d. short-selling is allowed (i.e. weights can be negative). Q5: Fill in the following table. What do you see? Explain briey