Compute the expected returns of the three assets

Assignment Help Finance Basics

Reference no: EM132405735

Assignment -

Note: You must use MATLAB for the project and must include the code, data, and output in MATLAB in an appendix. You must write up the formulation for each part and show results of solving the model using tables or graphs with reasonable formatting (please do not just give me the dump of the computational output from MATLAB, this dump as mentioned should go in an appendix).

Part (a) -

You will use the following three ETFs (exchange-traded funds) to form a portfolio of these three assets. An ETF operates just like a stock, but these assets represent market indices or broad set of securities (stocks or bonds). For example, the purchase of one share of SPY (see below for description) represents an investment into the 500 stocks in the S&P 500.

(1) SPDR S&P 500 ETF (SPY), this is a fund that mimics the performance of the S&P 500 which is a well known market index consisting of 500 large capitalization stocks from the U.S.

(2) iShares Core US Treasury Bond (GOVT), this is a fund that mimics the performance of a wide set of U.S Treasury bonds.

(3) iShares MSCI Emerging Markets Mini Vol (EEMV), this is fund that mimics the performance of emerging market stocks but with lower volatility compared to other emerging market funds.

Tasks -

(a) Use yahoo finance to get the monthly adjusted closing prices of SPY, GOVT, and EEMV from Jan 2014 to Oct 2019 and compute the expected returns of the three assets, the standard deviations of the three assets as well as the co-variances between all assets over this time period. Show these parameters in your report but you don't have to show the monthly prices or the computations that you did to get the parameters.

(b) Use the mean-variance optimization model to generate an efficient frontier of the three assets. Create a table where for each expected return goal R show the optimal weights of the assets as well as the portfolio variance value. Also, plot the efficient frontier.

Note: Use formula sheet (formulas for expected return and covariances) to get the parameters for part (a) from the monthly adjusted closing prices. To compute a historical monthly return, use the closing price for the first trading day of a month and the closing price of the last trading day of the month.

PART (b) -

Repeat Part (b) using the stocks SPY, GOV, EEMV as well as the stocks below (so portfolios will have 8 assets now) that have heavy involvement and connection to development or use of blockchain technology (some people think that these stocks are going to do well in the future)

(4) CME Group (CME)

(5) Broadridge Financial Solutions (BR)

(6) Cboe Global Markets (CBOE)

(7) Intercontinental Exchange (ICE)

(8) Accenture (ACN)

Compare the efficient frontiers from Part (a) and Part (b). Does including the stocks in part 2 lead to better portfolios? Discuss.

Reference no: EM132405735

Questions Cloud

How does the reserve bank of australia : How does the Reserve Bank of Australia set the interest rate? What are the main factors that determine its decisions?

DSO102 Design Studio 1 Assignment : DSO102 Design Studio 1 Assignment Help and Solution, Torrens University - Assessment Writing Service - Apply specified design software skills

Goal of government is to hold debt-gdp ratio constant : If the goal of the government is to hold the debt-GDP ratio constant, what must be the size of the primary surplus and the size of total budget surplus?

Kind of economic argument could be made against fracking : Based on these potential costs to the population at large, what kind of economic argument could be made against fracking?

Compute the expected returns of the three assets : Use yahoo finance to get the monthly adjusted closing prices and compute the expected returns of the three assets, the standard deviations of the three assets

What is the major determinant of consumption behavior : What is the resulting linear equation for the consumption relationship? Now, draw the consumption function, being sure to mark each axis.

What kind of policy mix should be needed : The economy was in full employment status at the beginning, but now the government has decided to change the demand structure from investment to consumption

Mundell-fleming model : A small open economy has unexpectedly announced that it will default on its debt in the foreseeable future.

Changes the analysis in the mundell-fleming model : Explain the mechanism by which allowing the price level, P, to vary changes the analysis in the Mundell-Fleming model.

User Account

All Pages