Você está na página 1de 1

# Creating Markowitz efficient frontier using MS-Excel You have been assigned a twin task to learn excel solver

and creating Markowitz efficient frontier. Use the following information to answer the questions given below. Thee Asset Allocation Model based on equally weighted portfolio Asset Weight Expected Return (%) Standard Deviation (%) 37.6 30.1 24.0 Sharpe ratios 0.38 1.14 1.42 Correlation with Asset A 1.00 0.12 0.26 Correlation with Asset B 0.12 1.0 0.3 Correlation with Asset C 0.26 0.3 1.0

A 1/3 21.3 B 1/3 41.3 C 1/3 41 The risk free rate of return is 7%.

1. Calculate the weightages, portfolio return, portfolio standard deviation and shape ratio associated with minimum variance portfolio and optimum risky portfolio. a. Suppose Asset A is now seem to be more correlated with asset C and correlation between them is changing to 0.8, calculate everything required in 1. b. Suppose Asset A is now seem to be behaving differently and its correlation with asset C is as low as -0.8. Calculate everything in 1 again. c. Suppose that asset C suddenly becomes less attractive and more risky with expected return of 30% and standard deviation of 30%, how would your answers in Q.1 change? 2. Assume again that the correlation between Asset A and Asset C is 0.26. How would your answers in Q.1 change if non negativity constraints are added? What happens if correlation between Asset A and C is 0.8? What if it changes to-0.8? 3. How does the base case optimum portfolio Sharpe ratio change, if shorting is not allowed and no asset can be allotted more than 50% of the total portfolio? 4. How does your portfolio change if the risk-free rate goes down to 5% from the current 7%? Assume no shorting is allowed? 5. How would you allocate your clients money between T-bill and the optimal portfolio you have computed if your client has coefficient of risk aversion of 3.0 6. Create and efficient frontier and capital allocation line passing through optimum risky portfolio and minimum variance portfolio.