How to develope combined-asset portfolios, Portfolio Management

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You are going to develop two multi-asset portfolios from the stocks you chose.  Place the information for these steps in the "Portfolios" worksheet.

Step 1) The first portfolio will have equal initial investments in the four stocks. Calculate the periodic return for this portfolio as the average of the 4 individual stock returns for each and every month.  Next, construct a cumulative return for your equally weighted portfolio.  To compute the cumulative return, set the February1998 value to 1.0000.  Then compute the March 1998cumulative return as the February 1998 value times the quantity 1 plus your periodic return forMarch. Drag this equation down the page.

Step 2) The second asset will be a market-cap weighted portfolio.  You will need to once again visit the site and find the market capitalization or market value(aka "Mkt Cap") for each stock. Go to the initial company page to obtain the current price, and go to Key Statistics (on the left) to obtain current shares outstanding. To determine your initial allocation you will need to sum the 4 capitalizations and then divide each of your stock's "mkt cap" by the sum of the mkt caps. Thus you will have one set of weights based on current price and shares outstanding, and you will use these weights for the entire period.Next, to determine your returns compute a weighted average return for each month based on the weightings you just computed.  Display the information on price, shares outstanding, and market cap for each stock on the top of the Portfolios sheet. This will give you 4 market value weightings based on relative market values in February 1998.

NOTE: If you picked a stock that has any missing data prior to 2003, you will have to compute 2 sets of weights.  The equally weighted portfolio will have weights of 1/3 for each stock during the portion of the time period that has only 3 stocks and the weight of each stock will change to 1/4 as soon as the return sequence starts for the fourth stock.  Your market value weights will similarly change when the fourth stock's return sequence begins; however, each stock will have different weights.  Remember that in both weighting schemes the sum of the weights should be 1.0 or 100%

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