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You are asked to derive a set of simulated random portfolios consisting of shares shown in the
DATA sheet. Use these randomly generated portfolios as an approximation to find the minimum
variance portfolio and "optimal" portfolio
Optional features:
Please provide information for which item below you wish to claim marks!
(1) Program your own VBA array function to produce the variance/covariance matrix of
returns.
(full marks are earned if your program does not rely on calling Excel worksheet functions
like COVAR from VBA).
(2) The user is able to choose whether to allow short-sales.
(3) The user has a choice for basically an unlimited number of simulations.
There is no requirement, however, to plot such large iteration simulations. Note that
efficiency and speed of your program will be crucial.
(4) The plot of the simulated portfolios also includes the capital market line and the envelope
of feasible portfolios (method using SOLVER as shown in Benninga).
(5) Devise methods to "speed up" your simulation, i.e. to approach the solution found with
Excel’s built-in SOLVER with fewer simulations. Measure the quality of your simulated
solution as for example shown in a solution developed by Mark Hannegan in 2004 (see
picture below)
(6) Any other creative element in the simulation, i.e. method to generate random numbers.
Allow Short
Limit Short
Show Envel
Show Effici
12%
Return to Main Menu
Raw Stock Return Data
YY/M/D Carter Holt Fernz Ubix Indpt News Lion Nathan
91/ 5/ 2 14.91% 12.75% 2.94% 19.62% -2.42%
91/ 6/ 4 -0.54% 0.87% 9.71% -8.99% 11.18%
93/ 1/ 5 1.43% 7.69% -2.72% 0.00% -2.59%
93/ 2/ 1 -2.53% -7.14% 25.14% -0.75% -9.50%
93/ 3/ 1 8.89% -7.21% -12.05% 0.75% -1.93%
4.69%
1.32%
11.49%
Monte Carlo Portfolio Simulation by Ray Guo (Best vi
Legend
6%
l Min variance portfolio
-- Efficient Frontier no SS 2%
-- Efficient Frontier w SS
50% 60%
50%
40%
40%
30%
30%
20%
20%
10% 10%
0% 0%
Carter Holt Carter Holt
Ubix Ubix
Lion Nathan
mulation by Ray Guo (Best viewed in 1024x800)
Number of portfolios 10
Or enter manually
70% Row 11
Column E
60%
50%
40%
30%
20%
10%
0%
Carter Holt
Ubix
Lion Nathan
Number of portfolios User Choice
1 10 1
2 50 Which is…
3 100 10
4 500 Unless…
5 1,000 10
6 3,000
7 5,000
Back Carter Holt Fernz Ubix Indpt News Lion Nathan Sanford
Carter Holt #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
Fernz #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
Ubix #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
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Lion Nathan #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
Sanford #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
B - Transpose
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