Cashback Offer from 1st to 15th March 2021. Get Flat 20% Cashback credited to your account for a minimum transaction of $80. Post Your Question Today!

Question Details Normal
$ 1.00

sample fin 421 assigment

  • From Business, Finance
  • Due on 12 Feb, 2021 08:07:00
  • Asked On 12 Feb, 2021 07:09:50
  • Due date has already passed, but you can still post solutions.
Question posted by
Online Tutor Profile

In this assignment you will apply mean variance analysis for an asset allocation decision using real data.

Mean Variance Analysis in Practice

Assume you are a portfolio manager for a large pension fund and in charge of allocating funds across major asset classes. Specifically, today is 12/31/2014 and you are assembling a portfolio for January of 2015. Your investment universe consists of T-bonds (Barclays U.S. Treasury index), investment grade corporate bonds (Barclays U.S. Corp index), domestic stocks (S&P 500), international stocks (MSCI World index), commodities (Goldman Sachs Commodity In- dex), and gold. Asset allocation decisions are made based on mean variance analysis.

On Blackboard, you will find an Excel file containing historical monthly net returns for these assets. Assume that the risk-free rate for 1/2015 equals 0%.

A Report the mean and variance-covariance matrix for all assets.

B Report the mean, standard deviation, and portfolio weights for both the tangency portfolio and the minimum variance portfolio

C Compute the optimal share invested in risky assets for an investor with the utility function U = μ − ασ2 and values for risk aversion, α, between 10 and 40.1 Plot the optimal risky asset share as a function of α. Is the function increasing or decreasing? Explain economically why you find the slope that you do.

D Plot the frontier of risky assets. To do so, use the minimum variance portfolio and the tangency portfolio found above, along with the two fund separation property. Use weights between -25 and 15 on the minimum variance portfolio. Add the individual assets as ’dots’ to the plot.

E Food for thought, i.e. no need to hand this part in! Suppose you form a portfolio that invests in both the minimum variance portfolio and the tangency portfolio. When the weight on the minimum variance portfolio equals 5, what are the weights on the individual assets (T-bonds, corporate bonds, etc.)?

Available Answers
$ 10.00

[Solved] fin 421 assigment

  • This solution is not purchased yet.
  • Submitted On 13 Feb, 2021 12:42:48
Answer posted by
Online Tutor Profile
Please see the attached fi...
Buy now to view the complete solution
Other Related Questions

No related question exists

The benefits of buying study notes from CourseMerit

Assurance Of Timely Delivery
We value your patience, and to ensure you always receive your homework help within the promised time, our dedicated team of tutors begins their work as soon as the request arrives.
Best Price In The Market
All the services that are available on our page cost only a nominal amount of money. In fact, the prices are lower than the industry standards. You can always expect value for money from us.
Uninterrupted 24/7 Support
Our customer support wing remains online 24x7 to provide you seamless assistance. Also, when you post a query or a request here, you can expect an immediate response from our side.
Only 45 characters allowed.

$ 629.35