Efficient Portfolio Frontier: Analysis of Market Volatility and Stocks

This assignment delves into the concept of the efficient portfolio frontier, explaining its significance in maximizing returns for a given risk level or minimizing risk for a desired return. It discusses how the efficient frontier, introduced by Harry Markowitz, relates to modern portfolio theory and highlights its importance in portfolio construction and valuation. The document also examines the impact of market volatility, measured by standard deviation, and offers insights into managing this volatility through diversification. The assignment further provides an overview of four specific Swiss stocks: Nestle, Credit Suisse, SGS, and Richmond, detailing their respective businesses and market positions. The analysis is supported by references to relevant financial resources.

QUESTION 1 (A)
The efficient portfolio frontier is the bunch of portfolios that offers the maximum rate of return for a
particular level of risk or the lowest level of risk for a particular level. Portfolio that lies below the
level of efficient frontier are known to be sub optimal portfolio because they do not provide a
maximum rate of return for a particular level of risk. Sometimes portfolio also have a very high level
of risk but the return is very much defined .According to the risk taken by the investor in their
portfolio ,return is not according to the mark. The efficient portfolio theory was introduced by Nobel
Laureate Harry Markowitz in the year 1952 and is related to the modern portfolio theory concept.
( InvestingAnswers, Inc, 2019)
Graphically efficient portfolio frontier represents that maximizes the return for the risk undertaken.
Return of an efficient portfolio is mainly dependent upon the combinations of investment that make
up the portfolio. Generally investors overload the portfolio with shares and securities which offer the
maximum return but when combined together there standard deviation is very much lower as
compared to the standard deviation of the individual securities. The efficient frontier also allows the
investors to understand that how the portfolio expected return can vary or change with the
percentage of risk borne by the investors. ( InvestingAnswers, Inc, 2019)
QUESTION 1 (B)
The efficient portfolio is gaining importance because of the following few reasons which can be
depicted here in below:
 The efficient portfolio depicts the relationship between the return that can be expected
from the portfolio and the portfolio volatility. It can also be depicted on the graph of a risk
against the expected return form the portfolio. (Pietersz, 2019)
 The efficient portfolio is also a main concept to the modern portfolio theory.
 The efficient portfolio frontier theory is mainly important to the theory of portfolio
construction and valuation. (Pietersz, 2019)
 Diversification benefits can be illustrated through the efficient portfolio frontier theory.
 The efficient frontier is used to drawn a market curve when there is no risk free assets.
When there is availability of a risk free asset in the market the curve becomes a simple
straight line which is called a securities market line.
 The efficient frontier gives the best level of return expected from undertaking a particular
level of risk or the minimum amount of risk undertaken in order to gain the maximum
benefit of return from the portfolio. (Pietersz, 2019)
QUESTION 1 (C)
The market is highly volatile in nature and is lying in the range of 7300 to 9800.The higher the
volatility in the market the more risky the security is and the investment in the market. Generally the
volatility in the market is measured through the standard deviation or variance. The high volatility in

the market occur when the trading is done on a large scale and a wide range of price fluctuations.
But sometimes the reasons for the volatility in the market is expected is due to the traders, short
sellers, and institutional investors. To ignore this market volatility one should be invest properly in
the market and do not fasten to jump into or out of the market and always investors should try to
maintain a diversified portfolio.
NOTE: The 3 months Treasury bill rate is assumed to be -0.9%
QUESTION 3:
The name of the selected stocks are here in below:
1) Nestle: the Company Nestle is listed in the Switzerland market index and is a nutrition,
health and wellness based company. The main zone of the company Nestle are Zone Europe,
Middle East and North Africa. The key product of the company includes liquid beverages,
milk products, ice cream, water, nutrition and health related products, milk maid, cooking
products, pet care products. (Reuters.com, 2019)
2) Credit Suisse: The Company Credit Suisse is listed in the Switzerland market index and is a
financial based service company. The company provides a wide range of services like private
banking and wealth management solutions to its customers. It provides advice based on
investment and asset management services. (Reuters.com, 2019)
3) SGS Said is a Switzerland based company and listed in SMI .It provides various inspection,
verification, testing and certification based services. Inspection means checking the quality
and weight of the goods at the time of shipment. Testing services are provided across the
globe and test the quality of the product and customer certification is done to confirm
whether it is complied with the regulatory requirement of the defined standard.
(Reuters.com, 2019)
4) Richmond: This is a Switzerland based jewelry company. The main business of this company
includes jewelry and watch making. The company also has other segments like Montblanc,
Alfred Dunhill, peter Millar etc. (Reuters.com, 2019)

References
InvestingAnswers, Inc. (2019, April 11). Efficient Frontier. Retrieved from investinganswers.com:
https://investinganswers.com/financial-dictionary/investing/efficient-frontier-1010
Pietersz, G. (2019, April 11). Efficient frontier. Retrieved from moneyterms.co.uk:
https://moneyterms.co.uk/efficient-frontier/
Reuters.com. (2019, April 11). Compagnie Financiere Richemont SA (CFR.S). Retrieved from
www.reuters.com: https://www.reuters.com/finance/stocks/company-profile/CFR.S
Reuters.com. (2019, April 4). Credit Suisse Group AG (CS.N). Retrieved from www.reuters.com:
https://www.reuters.com/finance/stocks/company-profile/CS.N
Reuters.com. (2019, April 11). Nestle SA (NESN.S). Retrieved from www.reuters.com:
https://www.reuters.com/finance/stocks/company-profile/NESN.S
Reuters.com. (2019, April 11). SGS SA (SGSN.S). Retrieved from www.reuters.com:
https://www.reuters.com/finance/stocks/company-profile/SGSN.S