Using Excel

MONTHLY Expected Returns, Standard Deviations, and Correlations July $1990$ through December $2014,294$ months, returns are total stock market returns for the region$)$

For the three questions below, assume a risk$-$free rate of $0\mathrm{.}24\%$ per month.

Suppose you are currently invested $100\%$ in U$.$S$.$ stocks and you CANNOT short:

a$.$ Find the portfolio that maximizes expected return if you want the same risk of U$.$S$.$ stocks.

b$.$ What is the expected return of this portfolio and what are the portfolio weights?

Suppose you CANNOT short:

a$.$ What is the expected return and standard deviation of the tangency portfolio? What are the portfolio weights?

b$.$ Does JAPAN have any part in the tangency portfolio? If yes, why is JAPAN a useful part of the portfolio? If not, why is JAPAN not part of it$?$

Suppose you CANNOT short:

a$.$ Now assume that the expected return for Japanese stocks is $0\mathrm{.}96\%$ per month $($the same as Asia Pacific$).$ What is the expected return and standard deviation of the tangency portfolio? What are the weights?