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HW01_2012B

# HW01_2012B - FIN 6275 Homework 1 FIN 6275(PART I INVESTMENT...

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FIN 6275 Homework 1 FIN 6275 (P ART I) I NVESTMENT A NALYSIS AND G LOBAL P ORTFOLIO M ANAGEMENT Spring 2012 H OMEWORK I P ORTFOLIO M ANAGEMENT This homework uses the data that you obtained for the assignment from the Fall which you submitted to me earlier this semester, namely: The monthly value-weighted return on the ‘ 12 Industry Portfolios ’ from January 1980 to July 2011, keeping only the returns of the following 6 industries: Durables, Energy, Business Equipment, Utilities, Healthcare, Finance or in their notation: ‘Durbl’, ‘Enrgy’, ‘BusEq’, ‘Utils’, ‘Hlth’, ‘Money’ Import them into Matlab: At this point, you should have at least three variables in your workspace: R = a 379x6 matrix of industry portfolio returns dates = a 379x1 vector of dates names = a 1x6 vector of industry portfolio names Make sure your returns are in decimals (i.e. 0.0209 stands for 2.09%). Some of the matlab functions are only designed to work with decimals. The project should have a summary of all results separately (for example in a MS Word file) from the programs themselves (which may be submitted in a Matlab Editor .m file). Both results and programs should be submitted in HARD COPIES IN CLASS ON F EB 18, 2012 . 1

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FIN 6275 Homework 1 1. Analysis of Stand-Alone Risk and Return: a. Plot all portfolios in a Mean-Variance framework (i.e. return – standard-deviation graph). Note: Plot all portfolios in the same graph and make sure you include a legend or labels so the portfolios can be identified. b. Is any of the portfolios dominated by any other portfolio? If yes, which one(s) is (are) dominated and by which other portfolio(s)? c. Calculate the utility of an investor with a risk-aversion of A=5 from holding each portfolio? Which portfolio would this investor prefer? d. Calculate the utility of an investor with a risk-aversion of A=2.5 from holding each portfolio? Which portfolio would this second investor prefer?
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HW01_2012B - FIN 6275 Homework 1 FIN 6275(PART I INVESTMENT...

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