AFIN3052 - Markowitz’s Mean-Variance Portfolio - Statistics Assignment Help

Assignment Task

Tasks:

1. Discuss background information of Markowitz’s mean-variance portfolio optimisation framework, including model assumptions, economic theories, etc.

2. Using the data provided, calculate daily log returns and estimate the model parameters. Ignore any non-trading days. Assume there are 252 trading days in one year.

3. Construct the following portfolios:

a. Global Minimum Variance (GMV) portfolio using the 50 constituents (Short selling allowed);

b. Global Minimum Variance (GMV) portfolio using the 50 constituents (No short sales);

c. Optimal portfolio using the 50 constituents (Short selling allowed);

d. Optimal portfolio using the 50 constituents (No short sales); Assume the risk-free rate in the analysis period is 0.5% p.a. flat.

4. Graph the followings:

a. The efficient frontier of portfolios containing risky assets only, assuming short selling allowed.

b. The efficient frontier of portfolios containing risky and risk-free assets, assuming short selling allowed.

5. Report the weightings, expected returns, standard deviations and Sharpe ratios of the portfolios in task 3. The performance statistics should be annualised. Comment the results.

6. Discuss the difficulty of practical implementation of the above portfolios.

7. Conclusion, suggestions and recommendations.

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