Excel Project (Efficient portfolios and Efficient frontier)
You are assigned with five stocks and you are expected to build the investment portfolios using those five stocks. Note that I showed you an example of a three-stock portfolio in the attached excel file. You are expected to apply the same concepts to the five-stock portfolios.
Please collect monthly stock price for the five companies that you are assigned from FINANCE.YAHOO.COM and employ the data time range from Jan 1, 2015 to Oct 30, 2020. Then using the risk-free rate of 0.33%, you are expected to develop the complete portfolio and develop the efficient frontier of these six securities (T-bill and five stocks). Following are the procedure in details:
1) Collect monthly stock price data from Finance.YAHOO.COM. The time range for the date should be from Jan 1, 2015 to Oct 30, 2020.
2) Compute monthly stock returns for each stock ( monthly rate of return = (P1 – P0) /P0; P is monthly adjusted close price). Then compute mean and standard deviation of stock returns for each company (See my excel example with the sheet entitled ‘Data’)
3) Develop Table of Covariance of these five stocks (See my excel example with the sheet entitled ‘Data’)
4) Develop Efficient Frontier for all risky portfolios constructed with 5 assigned stocks (See my excel example with the sheet entitled ‘EF’ and ‘Graph’)
5) Find the Minimum-Variance risky portfolio (See my excel example with the sheet entitled ‘MVP’)
6) Find the Efficient portfolios including a risk free asset with risk free rate of 0.33% (See my excel example with the sheet entitled ‘Sharpe Ratio for CML’ )
7) Draw the capital market line (CML) (See my example with the sheet entitled ‘Sharpe Ratio for CML’ and ‘Graph’)
Video Clip for Excel project：
The attachments are the Companies assigned, An example of a three-stock portfolio (excel template), and Portfolio Optimization Project Slides.