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    EF3320 Group Project

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    Johnny Lam
    This document contains a group project for a security analysis and portfolio management class due on November 21, 2020. It includes 8 questions regarding analyzing the performance and efficiency of different portfolios including the City College portfolio, VWRETD index, S&P 500 index, and optimal risky portfolios. Tables of expected returns, standard deviations, and asset allocations are provided for analysis.

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    EF3320 Group Project

    Uploaded by

    Johnny Lam
    58 views8 pages
    This document contains a group project for a security analysis and portfolio management class due on November 21, 2020. It includes 8 questions regarding analyzing the performance and efficiency of different portfolios including the City College portfolio, VWRETD index, S&P 500 index, and optimal risky portfolios. Tables of expected returns, standard deviations, and asset allocations are provided for analysis.

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    This document contains a group project for a security analysis and portfolio management class due on November 21, 2020. It includes 8 questions regarding analyzing the performance and efficiency of different portfolios including the City College portfolio, VWRETD index, S&P 500 index, and optimal risky portfolios. Tables of expected returns, standard deviations, and asset allocations are provided for analysis.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    58 views8 pages

    EF3320 Group Project

    Uploaded by

    Johnny Lam
    This document contains a group project for a security analysis and portfolio management class due on November 21, 2020. It includes 8 questions regarding analyzing the performance and efficiency of different portfolios including the City College portfolio, VWRETD index, S&P 500 index, and optimal risky portfolios. Tables of expected returns, standard deviations, and asset allocations are provided for analysis.

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    You are on page 1of 8

    2020 - 2021

    EF3320
    Secu Anlys & Portfolio Mgt
    C03

    Group 86

    Group Project

    Due day: November 21st, 2020

    Group
    Lam Hoi Ching (Chole) 55884418
    Chau Chui Yee (Tracy) 56232499
    Yeung Hei Ning (Clarence) 55723600
    Chiu Man To (Edward) 55723764
    Question 1.

    Performance City College VWRETD S&P 500 index


    statistics portfolio

    Expected return 10.51% 10.20% 7.82%

    Standard deviation 11.62% 16.29% 15.64%

    Shape ratio 65.40% 44.78% 31.41%

    Based on the above information, we can conclude that the City College portfolio performed
    better than both VWRETD and S&P over the 1995~2012 period. The Expected return of City
    College portfolio (10.51%) is larger than both VWRETD(10.20%) and S&P(7.82%)
    respectively. Therefore, the City College portfolio could have a reasonable and higher return
    compared with the others, also undering a lower risk.

    Question 2.
    Question 3.

    No, the portfolio of risk assets currently chosen by the college’s fund manager is not an
    efficient portfolio. As question 1 shows, the expected return and the standard deviation
    which is the risk of the current portfolio are 10.51% and 11.62 respectively. Also, according
    to question 2, the figure indicates that the portfolio has the same expected return with a
    lower risk which is 7.4. Therefore, the figure can show that the portfolio is not an efficient
    portfolio.

    The efficient risky portfolio:

    Weight

    SMLSTK 4.33%

    MEDSTK 28.33%

    LRGSTK -6.92%

    CBOND 8.96%

    GBOND 65.3%

    Question 4.
    The optimal (tangency) risky portfolio should be as follows:

    Weight

    SMLSTK 2.6%

    MEDSTK 18.8%

    LRGSTK -4%

    CBOND 36.1%

    GBOND 46.5%

    Based on Figure E, when the capital allocation line meets the efficient frontier it will achieve
    the optimal (tangency) risky portfolio. The expected return of optimal (tangency) risky
    portfolio and the standard deviation are 9.51% and 6.53% respectively.
    Question 5.

    Based on Fig F, the investment proportion with an expected return which equal to existing
    portfolio’s expected return should be as follows:

    Weight

    SMLSTK 3.00%

    MEDSTK 21.70%

    LRGSTK -4.65%

    CBOND 41.62%

    GBOND 53.54%

    TBILL -15.21%

    According to Fig D, the expected return of this portfolio is equal to the existing portfolio which
    is 10.51%. If there is included the risk-free assets and risky assets, the expected standard
    deviation is 7.53%. Therefore, it shows that it is lower than the current portfolio.

    Question 6.

    The efficient portfolio allocation including risk-free asset shown as follow:

    Weight

    SMLSTK 3.70%

    MEDSTK 28.15%

    LRGSTK -6.09%

    CBOND 53.56%

    GBOND 68.82%

    TBILL -48.15%

    According to the excel shown in Figure G, the ‘floor’ rate is 1% per month and it shows that
    the annual expected return should be around 12.68%. As a result, compared with this level
    expected return with the data showed, the portfolio expected standard deviation should be
    around 9.68%.
    Question 7.

    If the college wants to diversify its portfolio, three risky assets should be included in the
    portfolio. By comparing two figures, when having the same level of expected return, the
    portfolio can keep a lower standard deviation with those three risky assets. The orange line
    is more preferable since three more assets have a higher shape ratio, which means that the
    same return can be hence obtained with a lower risk.

    Question 8.

    Expected return 12.68%

    Standard deviation 14.93%

    SMLSTK 25%

    MEDSTK 23.1%

    LRGSTK 0%

    CBOND 0%

    GBOND 17.93%

    REIT 25%

    PM 8.9%

    EAFE 0%

    To achieve the “floor” rate of return of 1.00% per month, which equals to 12.68% per year,
    12
    (1 + 0. 01) − 1 , each asset allocation is shown on the above table. As a result, the
    expected standard deviation for this portfolio is 14.93%. No short selling exists and all the
    assets should be not larger than 25%.
    Appendix

    Figure A

    Figure B

    Figure C
    Figure D

    Figure E

    Figure F
    Figure G

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