25503 Report on Investment Analysis
Added on 2020-05-11
4 Pages690 Words63 Views
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Running Header: INVESTMENT ANALYSIS1Investment analysisStudent's name:Institution:Professor's name:Course:
Investment analysis22.a)The weight of the ten stocks which minimize the variance of the portfolio is as shown below:CBAWBCANZBHPNABCSLTLSWESWOWMQGVariance1.0110.9680.8270.5370.8131.6581.0950.8800.6981.520weight 10.670.020.110.350.13-0.29-0.050.090.21-0.25weighted variance0.6810.0220.0930.1870.103-0.479-0.0510.0810.146-0.377beta 1.0120.9900.9190.7590.9091.3131.0540.9430.8551.251weighted beta0.6810.0230.1040.2640.115-0.380-0.0490.0860.179-0.310From the weights, it can be seen that all the stocks had a reduction in variance expect for CBA. On the other hand, none of the stock had an exposure that is exactly one but CBA, CSL, and TSLhad an exposure that was close to the index. The weights were derived from the variances covariance matrix using the solver add-in in excels.Arbitral weights were assigned to the stocks at first. The solver then minimized the variance, subject to the arbitral weights. However, it should be noted that the arbitral weights had to sum up to 1. The weighted variance was obtained by multiplying the derived weights to the variance.A similar approach was also used for the weighted beta values.b)Table 4: RMSE minimizationCBAWBCANZBHPNABCSLTLSWESWOWMQGweight 10.670.020.110.350.13-0.29-0.050.090.21-0.25
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