Homework Portfolio 1

transcript

DAVIDE VIOTO (MSGF) – dvioto@fordham.edu

HOMEWORK PART 1GLOBAL EQUITY PORTFOLIO MANAGEMENT – Professor Douglas W. Blackburn

Davide Vioto (MSGF) – dvioto@fordham.edu

Using as data source finance.yahoo.com, I downloaded the monthly price of the 10 Stocks listed below for the period 2009-2013 and for 2014.

DIS GE JPM KO M

MCD NKE PEP PG TWX

The Adjusted Prices of the 10 Stocks are shown in the tables below for the period 2009-2013 and for 2014.

Dates DIS GE JPM KO M MCD NKE PEP PG TWX

02/01/09 18.99 9.61 22.31 17.56 8.01 46.95 20.58 45.09 44.42 19.51

02/02/09 15.40 6.94 19.98 16.79 7.05 42.67 18.89 45.32 39.26 16.08

02/03/09 16.68 8.25 23.25 18.26 8.02 44.57 21.45 45.60 38.38 14.86

… … … … … … … … … … …

01/10/13 66.52 24.61 49.22 37.53 44.52 90.94 74.19 80.07 76.48 63.94

01/11/13 68.41 25.09 54.64 38.38 51.43 92.51 77.51 80.42 79.76 61.39

02/12/13 75.00 26.60 55.85 39.45 51.81 92.19 77.26 79.51 77.10 65.13

02/01/14 71.69 23.85 53.56 36.12 51.62 89.47 71.57 77.04 73.12 58.69

03/02/14 79.79 24.38 54.97 36.48 56.14 91.17 77.16 76.76 75.06 63.02

… … … … … … … … … … …

03/11/14 91.35 25.78 59.38 44.09 63.91 95.15 98.45 98.07 88.35 84.41

01/12/14 94.19 24.83 61.77 41.53 65.08 92.09 95.61 93.24 88.99 84.71

The Returns of the 10 Stocks are shown in the tables below for the period 2009-2013 and for 2014.

02/01/09

02/02/09 -18.91% -27.78% -10.43% -4.38% -12.07% -9.11% -8.22% 0.50% -11.61% -17.56%

02/03/09 8.29% 18.80% 16.32% 8.73% 13.86% 4.44% 13.57% 0.61% -2.24% -7.64%

… … … … … … … … … … …

01/10/13 6.36% 9.42% 0.44% 4.46% 6.56% 0.32% 4.30% 5.77% 7.66% 4.45%

01/11/13 2.84% 1.99% 11.02% 2.28% 15.51% 1.72% 4.46% 0.44% 4.30% -3.99%

02/12/13 9.64% 5.99% 2.20% 2.79% 0.75% -0.35% -0.32% -1.13% -3.34% 6.10%

02/01/14 -4.41% -10.35% -4.09% -8.45% -0.37% -2.95% -7.36% -3.11% -5.17% -9.88%

03/02/14 11.29% 2.24% 2.64% 1.01% 8.76% 1.90% 7.81% -0.36% 2.66% 7.37%

… … … … … … … … … … …

03/11/14 1.24% 2.63% -0.53% 7.78% 12.26% 4.19% 6.79% 4.09% 3.62% 7.53%

01/12/14 3.11% -3.71% 4.02% -5.82% 1.82% -3.21% -2.88% -4.91% 0.73% 0.35%

To compute the weights, the Portfolio return and variance (ST.DEV.), I used the following data:• The returns of the Stocks shown previously.• Variance – Covariance Metrics (Above).

DIS GE JPM KO M MCD NKE PEP PG TWX0,4841% 0,4690% 0,3952% 0,1272% 0,3498% 0,1023% 0,2427% 0,0700% 0,1257% 0,3414%0,4690% 0,8587% 0,5803% 0,1779% 0,4706% 0,0943% 0,3264% 0,0993% 0,1952% 0,3375%0,3952% 0,5803% 0,8036% 0,1178% 0,4581% 0,0683% 0,2343% 0,0608% 0,1272% 0,3087%0,1272% 0,1779% 0,1178% 0,1891% 0,0073% 0,0881% 0,1010% 0,0649% 0,0662% 0,0711%0,3498% 0,4706% 0,4581% 0,0073% 1,1890% 0,0265% 0,3947% 0,0688% 0,1309% 0,2140%0,1023% 0,0943% 0,0683% 0,0881% 0,0265% 0,1455% 0,1014% 0,0329% 0,0599% 0,0961%0,2427% 0,3264% 0,2343% 0,1010% 0,3947% 0,1014% 0,4836% 0,0544% 0,0909% 0,1746%0,0700% 0,0993% 0,0608% 0,0649% 0,0688% 0,0329% 0,0544% 0,1026% 0,0533% 0,0656%0,1257% 0,1952% 0,1272% 0,0662% 0,1309% 0,0599% 0,0909% 0,0533% 0,1767% 0,1165%0,3414% 0,3375% 0,3087% 0,0711% 0,2140% 0,0961% 0,1746% 0,0656% 0,1165% 0,4764%

A 16,02536006B 0,312430549C 1465,547043D 201,0695026

• The variables of the Efficient Portfolio Model (Model 1)

Using the Model constructed in class, I computed the Optimal Portfolio Weights for the period 2009-2013.

Weights E[R]

DIS 54.77% 2.60%

GE -41.74% 2.17%

JPM -35.30% 1.97%

KO 145.25% 1.47%

M 72.45% 3.75%

MCD -45.52% 1.22%

NKE 32.17% 2.51%

PEP -82.51% 1.02%

PG -71.02% 1.03%

TWX 71.47% 2.30%

Target Return 5%

Portfolio Return 5%

Portfolio Variance 1.18%

Portfolio ST. DEV. 10.87%

DIS GE JPM KO M MCD NKE PEP PG TWX

-100.00%

-50.00%

50.00%

100.00%

150.00%

200.00%

Weights

The Model allows me to construct the Efficient Frontier. In the Plot is shown the Efficient Frontier through the data computed by the TABLE function of Excel. On the vertical axis is placed the Expected Return and on the horizontal axis is placed the Variance, both of the Portfolio.

Efficient FrontierE[R] Variance

1,18%1 1,09% 0,07%2 2,08% 0,14%3 3,07% 0,35%4 4,06% 0,71%5 5,05% 1,21%6 6,04% 1,85%7 7,03% 2,64%8 8,02% 3,57%9 9,01% 4,64%

10 10% 5,85%0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

10.00%

12.00%

Efficient Frontier

Using the Portfolio weights obtained form the model and the Returns of the stocks for 2014, I computed the Portfolio Returns for each month in 2014. Also, the statistics shown in the next page, for the Portfolio and the Stocks (rf=0%).

Date Portfolio

02/01/14 -11,04%

03/02/14 17,45%

03/03/14 -9,60%

01/04/14 0,79%

01/05/14 11,77%

02/06/14 9,14%

01/07/14 8,14%

01/08/14 1,10%

02/09/14 -0,35%

01/10/14 -2,71%

03/11/14 19,67%

01/12/14 -0,98%

BETA is computed considering S&P 500.

Sharpe Ratio Portfolio 0,5486

DIS GE JPM KO M MCD NKE PEP PG TWX Portfolio

Mean 1,9887%-

0,4955% 0,9089% 0,5632% 2,0484% 0,0347% 1,9537% 1,3830% 1,2601% 2,4626% 3,6137%

Variance 0,16% 0,16% 0,14% 0,29% 0,29% 0,09% 0,36% 0,10% 0,13% 0,56% 0,95%

ST. DEV 4,05% 4,03% 3,77% 5,39% 5,41% 3,05% 6,02% 3,20% 3,56% 7,48% 9,76%

Skewness 0,8886 -1,4025 -0,7966 -0,5137 0,5081 -0,5799 0,2656 -0,7980 -0,1397 0,3292 0,1976

Kurtosis 1,6099 2,2000 0,9683 -0,9357 -0,4020 -0,1052 -0,2193 -0,3060 -0,2376 0,7089 -0,7674

BETA 1,3928 1,3631 0,4888 1,4707 1,4547 0,6528 1,0401 0,7874 0,9686 0,6937 2,4069

I compared the “out-of-sample” performance using as Benchmark Portfolio S&P500. The results I computed for S&P500 are shown in the following tables:

Date S&P 500 (^GSPC) Returns02/12/13 1848,359985 02/01/14 1782,589966 -3,56%03/02/14 1859,449951 4,31%03/03/14 1872,339966 0,69%01/04/14 1883,949951 0,62%01/05/14 1923,569946 2,10%02/06/14 1960,22998 1,91%01/07/14 1930,670044 -1,51%01/08/14 2003,369995 3,77%02/09/14 1972,290039 -1,55%01/10/14 2018,050049 2,32%03/11/14 2067,560059 2,45%01/12/14 2058,899902 -0,42%

The “out-of-sample” Mean return is 3.6137%, higher than the Benchmark Portfolio, which has a Mean Return of 0.93%. However, the Variance of S&P500 for 2014 is lower (0.05%) than the “out-of-sample” (0.95%). Also the Skewness and the Kurtosis are different: the first is positive for the “out-of-sample” Portfolio, negative for S&P500; the second is in both cases negative, -0.7062 (out-of-sample) compared with -0,4158 (S&P500). In conclusion, the Sharpe Ratio of the “out-of-sample” is higher that the one of the S&P500, so the out-of-sample Portfolio performs better than S&P500 for 2014.

Mean 0,93%Variance 0,05%ST. DEV. 2,34%

Skewness -0,44302489Kurtosis -0,41576619

rf 0%Sharpe Ratio 0,39645255

Homework Portfolio 1

Documents