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# Assignment Portfolio Optimization

п»їQuestion one particular

C) If I could decide to allocate between risk free advantage and both Citigroup or Google, Let me choose Google. As Google has bigger returns intended for lower risk.

E) Drawing the minimal variance frontier for C and GOOG

Issue 2

A)

B) I will allocate my personal capital with all the following weight loads

OPTIMAL

COLLECTION

Riskless

thirty-three. 06%

XOM

-61. 38%

GE

-6. 52%

PFE

60. 00%

WMT

25%

GOOG

twenty four. 86%

Problem 5

A) ii, 7%

B) iii, 2 . 0

C) ii, phony

D) i actually, true

E) iii, plus1

F) iii, a positive weight in the safe asset and a negative excess weight in the market G) i, even more idiosyncratic risk than industry portfolio

Problem 6

A) The come back data in the four funds is given under. It is crystal clear that DFA has the greatest risk tweaked returns while captured by the Sharpe percentage. It has the disproportionately substantial returns intended for the risk used.

Therefore , in order of performance, the funds are enlisted listed below:

1) DFA

2) Varied

3) To. Rowe Cost

4) Goldman

B)

Using CAPM

I offered regressed excessive stock go back with excessive market comes back to separate Alpha.

R (Goldman)= 1 . 167 (Rm вЂ“ Rf) -. 00705

Significance: R2 Value can be. 87, X variable T stat is definitely 19. 8, Alpha T-stat is -2. 4; Residuals of Back button variable happen to be randon, thereby significant Back button Variable and Alpha beliefs. 95% likelihood band to get Alpha is definitely -1. 2% to -. 12%

R (DFA) =. 975 (Rm-Rf) +. 01379

Significance: R2 Value can be. 68, Back button variable To stat can be 11, Alpha T-stat can be 3. two; Residuals of X changing are randon, thereby regression has significant results); 95% probability music group of LEADER is via. 05% to 2 . 2%)

R (Diversified) = 1 . 09(Rm-Rf) +. 0062

Relevance: R2 Worth is. 69, X adjustable T stat is 11, Alpha T-stat is 1 . 3; Commissions of Back button variable are randon, thereby regression offers significant results); The First value t-stat is

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