Financial Markets and Institutes

This article discusses various aspects of financial markets and institutes, including holding period returns, rebalanced portfolios, momentum portfolios, and perfect portfolios. The article provides detailed calculations and analysis of the performance of stocks such as Amazon and Johnson & Johnson, and offers insights into portfolio diversification and risk management.

Running head: FINANCIAL MARKETS AND INSTITUTES
Financial Markets and Institutes
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL MARKETS AND INSTITUES
Table of Contents
In Response to Question 2...............................................................................................................2
Bibliography....................................................................................................................................9

2FINANCIAL MARKETS AND INSTITUES
In Response to Question 2
a) The holding period returns for the S&P 500 Index was taken from the last 1,3 and 5 years
monthly data from yahoo finance in order to calculate the holding period returns,
geometric rate of return and average rate of return.
Holding Period Returns
Particulars 1 Year 3 Year 5 Year
Purchase Price 2673.610107 2043.94 1848.36
Selling Price 2649.929932 2649.93 2649.93
HPR -0.89% 29.65% 43.37%
Annual HPR -0.89% 9.04% 7.47%
Arithmetic Returns -0.02% 0.76% 0.64%
Geometric Returns 2.16% 1.53% 2.10%
b) The holding period returns for the Amazon was taken from the last 1,3 and 5 years
monthly data from yahoo finance in order to calculate the holding period returns,
geometric rate of return and average rate of return.
Particulars 1 Year 3 Year 5 Year
Purchase Price 1169.469971 675.890015 398.79
Selling Price 1516.72998 1516.72998 1516.73
HPR 29.69% 124.40% 280.33%
Annual HPR 29.69% 30.92% 30.63%
Arithmetic Returns 2.72% 2.58% 2.59%
Geometric Returns 4.05% 9.58% 2.77%

3FINANCIAL MARKETS AND INSTITUES
c) The holding period returns for the Johnson and Johnson Company was taken from the last
1,3 and 5 years monthly data from yahoo finance in order to calculate the holding period
returns, geometric rate of return and average rate of return.
Holding Period Return
Particulars 1 Year 3 Year 5 Year
Purchase Price 136.90 95.40 80.39
Selling Price 141.99 141.99 141.99
HPR 3.72% 48.84% 76.64%
Annual HPR 3.72% 14.17% 12.05%
Arithmetic Returns 0.23% 1.17% 1.01%
Geometric Returns -5.74% 0.54% 0.17%
d) The monthly rebalanced portfolio was created by investing 50% of the portfolio amount
in each of the stocks and stocks was rebalanced was at the start of every month. The
rebalanced portfolio ensured that the weight of the stocks or the asset class in the
portfolio remains equal to 50% so that the portfolio is rebalanced at the starting of each
month.

4FINANCIAL MARKETS AND INSTITUES
Portfolio (P 1)
Amazon Inc. Johnson
Portfolio
Return
Investment
Value Investment Value Portfolio
Value
Current Weights
50% 50% Weight (100%) Amazon Inc. Johnson
Amazon
Inc. Johnson
500,00
0
500,00
0 1,000,000
12.032% -0.554% 11.478%
560,16
0
497,23
2
1,057,39
2 52.98% 47.02%
2.121% -3.199% -1.078%
572,04
3
481,32
5
1,053,36
8 54.31% 45.69%
-2.152% -0.353% -2.505%
559,73
0
479,62
8
1,039,35
8 53.85% 46.15%
4.104% -0.656% 3.448%
582,70
0
476,48
1
1,059,18
1 55.01% 44.99%
2.027% -2.872% -0.845%
594,51
1
462,79
8
1,057,31
0 56.23% 43.77%
2.153% 1.072% 3.225%
607,31
3
467,75
8
1,075,07
0 56.49% 43.51%
2.284% 4.218% 6.502%
621,18
2
487,48
9
1,108,67
1 56.03% 43.97%
6.618% 0.806% 7.424%
662,29
4
491,41
6
1,153,71
0 57.41% 42.59%
-0.241% 1.582% 1.341%
660,69
6
499,19
0
1,159,88
6 56.96% 43.04%
-10.110% 0.650% -9.460%
593,90
2
502,43
5
1,096,33
7 54.17% 45.83%
-2.543% 0.704% -1.839%
578,79
9
505,97
4
1,084,77
2 53.36% 46.64%
0.000% 0.000% 0.000%
578,79
9
505,97
4
1,084,77
2 53.36% 46.64%

5FINANCIAL MARKETS AND INSTITUES
Portfolio (P 1)
Rebalanced Portfolio Amount Profit/Loss(Buy/Sell)
Amazon Inc. Johnson Amazon Inc. Johnson
500,000 500,000
528,695.90 528,695.90 60,160 (2,768)
526,684.17 528,695.90 72,043 (18,675)
519,679.16 528,695.90 59,730 (20,372)
529,590.48 528,695.90 82,700 (23,519)
528,654.77 528,695.90 94,511 (37,202)
537,535.21 528,695.90 107,313 (32,242)
554,335.65 528,695.90 121,182 (12,511)
576,854.78 528,695.90 162,294 (8,584)
579,943.07 528,695.90 160,696 (810)
548,168.74 528,695.90 93,902 2,435
542,386.04 528,695.90 78,799 5,974
542,386.04 528,695.90 78,799 5,974
e) The portfolio P 2 was constructed using the 50:50 weight in each of the stock in the
portfolio where the return generated from each of the stock was calculated as the return
generated from each of the 50% weightage given to Amazon and Johnson Company. The
50% weightage will give the diversification benefit to the portfolio and will reduce the
standard deviation from the portfolio.
The 50% weightage given to the stocks was not rebalanced in the due course of the data
analyzed and trade done. The return from the portfolio was taken as the return generated
from the stock in the data period taken.

6FINANCIAL MARKETS AND INSTITUES
Portfolio (P 2)
Amazon Inc.
Johnso
n
Portfolio
Return Investment Value Portfolio
Value
Current Weights
50% 50%
Weight
(100%)
Amazon
Inc.
Johnso
n
Amazon
Inc.
Johnso
n
500,0
00
500,0
00 1,000,000
12.032% -0.554% 11.478%
560,1
60
497,2
32
1,057,3
92 52.98% 47.02%
2.121% -3.199% -1.078%
572,0
43
481,3
25
1,053,3
68 54.31% 45.69%
-2.152% -0.353% -2.505%
559,7
30
479,6
28
1,039,3
58 53.85% 46.15%
4.104% -0.656% 3.448%
582,7
00
476,4
81
1,059,1
81 55.01% 44.99%
2.027% -2.872% -0.845%
594,5
11
462,7
98
1,057,3
10 56.23% 43.77%
2.153% 1.072% 3.225%
607,3
13
467,7
58
1,075,0
70 56.49% 43.51%
2.284% 4.218% 6.502%
621,1
82
487,4
89
1,108,6
71 56.03% 43.97%
6.618% 0.806% 7.424%
662,2
94
491,4
16
1,153,7
10 57.41% 42.59%
-0.241% 1.582% 1.341%
660,6
96
499,1
90
1,159,8
86 56.96% 43.04%
-10.110% 0.650% -9.460%
593,9
02
502,4
35
1,096,3
37 54.17% 45.83%
-2.543% 0.704% -1.839%
578,7
99
505,9
74
1,084,7
72 53.36% 46.64%
0.000% 0.000% 0.000%
578,7
99
505,9
74
1,084,7
72 53.36% 46.64%

7FINANCIAL MARKETS AND INSTITUES
f) The momentum portfolio was created in the favor of stocks which provided the highest
amount of return and the relevant stock was given 100% weightage in each of the time
period or month taken down under analysis. The strategy taken for the portfolio was to
give weightage to the stock, which performed the best during the time period analyzed.
Portfolio (P 3)
Amazon Inc.
Johnso
n
Portfolio
Return Investment Value Portfolio
Value
Current Weights
100% 0%
Weight
(100%)
Amazon
Inc. Johnson
Amazon
Inc.
Johnso
n
1,000,0
00 - 1,000,000
24.064% -0.554% 24.06%
1,240,6
39 -
1,240,6
39 100.00% 0.00%
4.243% -3.199% 4.24%
1,293,2
78 -
1,293,2
78 100.00% 0.00%
-4.305% -0.353% -0.35%
1,237,6
03
1,237,6
03 100.00% 0.00%
8.207% -0.656% 8.21%
1,229,4
83
1,229,4
83 0.00%
100.00
%
4.054% -2.872% 4.05%
1,279,3
25
1,279,3
25 100.00% 0.00%
4.307% 1.072% 4.31%
1,334,4
20 -
1,334,4
20 100.00% 0.00%
4.568% 4.218% 4.57%
1,395,3
70 -
1,395,3
70 100.00% 0.00%
13.236% 0.806% 13.24%
1,580,0
68 -
1,580,0
68 100.00% 0.00%
-0.482% 1.582% -0.48%
1,572,4
45
1,572,4
45 100.00% 0.00%
-20.219% 0.650% -20.22%
1,582,6
67
1,582,6
67 0.00%
100.00
%
-5.086% 0.704% -5.09%
1,593,8
13
1,593,8
13 0.00%
100.00
%
0.000% 0.000% 0.00%
1,593,8
13
1,593,8
13 0.00%
100.00
%

8FINANCIAL MARKETS AND INSTITUES
g) The perfect portfolio sight was created by seeing the return generated from the stock in
the current month and the relevant weightage was given to each of the following stock.
Portfolio (P 4)
Amazon Inc.
Johnso
n
Portfolio
Return
Investment
Value
Investment
Value Portfolio
Value
Current Weights
100% 0%
Weight
(100%) Amazon Inc. Johnson
Amazon
Inc.
Johnso
n
1,000,0
00 - 1,000,000
24.064% -0.554% 24.06%
1,240,6
39 -
1,240,6
39 100.00% 0.00%
4.243% -3.199% 4.24%
1,293,2
78 -
1,293,2
78 100.00% 0.00%
-4.305% -0.353% -0.35%
1,288,7
18
1,288,7
18 0.00%
100.00
%
8.207% -0.656% 8.21%
1,394,4
90
1,394,4
90 100.00% 0.00%
4.054% -2.872% 4.05%
1,451,0
21 -
1,451,0
21 100.00% 0.00%
4.307% 1.072% 4.31%
1,513,5
10 -
1,513,5
10 100.00% 0.00%
4.568% 4.218% 4.57%
1,582,6
41 -
1,582,6
41 100.00% 0.00%
13.236% 0.806% 13.24%
1,792,1
27 -
1,792,1
27 100.00% 0.00%
-0.482% 1.582% -0.48%
1,820,4
78
1,820,4
78 0.00%
100.00
%
-20.219% 0.650% -20.22%
1,832,3
12
1,832,3
12 0.00%
100.00
%
-5.086% 0.704% -5.09%
1,845,2
16
1,845,2
16 0.00%
100.00
%
0.000% 0.000% 0.00%
1,845,2
16
1,845,2
16 0.00%
100.00
%

9FINANCIAL MARKETS AND INSTITUES
Bibliography
Johannes, M., Korteweg, A. and Polson, N., 2014. Sequential learning, predictability, and
optimal portfolio returns. The Journal of Finance, 69(2), pp.611-644.
Andriosopoulos, D., Gaganis, C. and Pasiouras, F., 2015. Prediction of open market share
repurchases and portfolio returns. Review of Quantitative Finance and Accounting.
Huang, W., 2018. Decomposing Differences in Portfolio Returns between North America and
Europe.
Antretter, T., Sirén, C., Grichnik, D. and Wincent, J., 2018. Insights on Angel Portfolio Returns.