Domestic Versus International Portfolio Selection Assignment

Assignment Task

Part A 

Everyone has to take Four Domestic Asset (Stocks/Bonds/Currency/Commodity Derivatives) You need to make a portfolio of 4 assets or stocks with equal weights.

Calculate the Portfolio Return, Risk (Standard deviation) and Sharpe ratio for selected time horizon (one year). By using the Solver tool in MS Excel, calculate optimal weights by maximising Sharpe ratio. Optimization process in MS Excel solver must be done by maximising the Sharpe ratio.

Part B 

Everyone has to take Four International Assets (Stocks/Bonds/Currency Derivatives /Commodity Derivatives-) You need make a portfolio of 4 assets with equal weights (Assets may be all international stocks (or) all Bonds (or) all Derivatives (or) Mix of Bonds, stocks and Derivatives for one- year time period.

Again Calculate the Portfolio Return, Risk and Sharpe ratio for selected time horizon (one year). By using the Solver tool in MS Excel, calculate optimal weights by maximising Sharpe ratio. Optimization process in MS Excel solver must be done by maximising the Sharpe ratio.

Part C

Consider two assets with higher weights from Domestic assets and two assets with higher weights from Foreign assets. Calculate the Portfolio Return, Risk and Sharpe ratio for selected portfolio. By using the Solver tool in MS Excel, calculate optimal weights by maximising Sharpe ratio. Optimization process in MS Excel solver must be done by maximising the Sharpe ratio.

Note: if you get only one asset in optimal weights, you should try with other assets till you get two assets with positive optimal weights. Same Time period for PART A and B (Slight change up to three months’ variation is acceptable)

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