USING APPLE, TESLA, WALMART, AMAZON, MINECRAFT

You are an aspiring portfolio manager at a large U.S. balanced mutual fund. Your boss wants you to give a shot, but before you get any money allocated to your strategies she wants to see how you go about building your portfolios. You will put together a spreadsheet for your calculations and a report of what is in your portfolio, your allocations, and why. Using models from our class or any other tools you require, complete the following:

PART I

Using the method of your choice, download 61 monthly prices for 5 different assets-Try your best to Find the positive Alpha (review CAPM for reference) assets. Calculate 5 years of monthly returns (the most recent 60 months), average monthly and annual returns, and the annual standard deviation of returns for each asset.

PART II

Calculate the correlation, covariance matrices and CAPM Betas and Alphas for the 5 assets.

PART III

Given your calculations thus far, choose TWO of the 5 assets to include in an initial portfolio. WHY are you choosing those two assets, for example, the assets had the greatest positive (CAPM) Alpha?

Start with a 50-50 allocation between your two assets. What is the expected portfolio return? What is the expected portfolio standard deviation?

Calculate AND GRAPH the efficient frontier for these two assets. Also, your fund cannot short securities, so your choices for allocations are bounded by 0% to 100%. Make it pretty and label carefully.

Calculate the minimum variance portfolio weights. At the minimum variance portfolio, what are the expected portfolio return, standard deviation, and Sharpe ratio? Calculate the mean-variance efficient portfolio weights using 0.08% (monthly) as your expectation of the short-term risk-free rate going forward. In other words, what allocation to your two assets gives the highest return for the least amount of risk (Sharpe Ratio)?