In: Business and Management

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Group Assignment
Application of Portfolio Theory
Semester 2, 2013

Total Marks: 40
Percentage Weighting: 20 %

Investment Guidelines

You are required to construct an Equity Investment Portfolio with the following specifications:

Market: Australia
Portfolio Size: $1 Million
Portfolio Composition: 4 assets; must be shares of companies listed on the ASX
Asset Allocation: Direct Investment in equities
Time Horizon: 5 years commencing January 1st, 2008 to January 1st 2013
Transaction Fees, taxes and charges: Ignore Portfolio Policy Objectives: Maximise total return (capital gains plus reinvested income) Portfolio Liquidity: $10 000 in cash or near-cash required per year Portfolio Benchmark: S&P ASX200 Portfolio Management Style: Passive, Buy and Hold Asset Weights: Equal weighting Market proxy: S&P ASX200 Risk free proxy: 90 day Bank Accepted Bill rate (BAB)

1. Portfolio Construction

* Manually collect price data for your 4 assets from the investment horizon - 5 years commencing January 1st, 2008 to January 1st 2013. * The price data should be Monthly. Depending on your choice of company you could find the price data from: Yahoo finance; the ASX; or the company’s own website * Download the price data for the sample period required.
[Note: You must leave all formulas in your answer, the excel functions allowed are “AVERAGE”,“SUM” and “SQRT” only]. Other excel data analysis package or functions can be used for checking purposes only.

i. Calculate the mean return and standard deviation of each investment asset ii. Calculate the mean return and standard deviation of your portfolio iii. Calculate the mean return and standard deviation of the market portfolio (S&P ASX200) iv. Generate the variance/covariance matrix for: the individual…...

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