Portfolio

Introduction

Origin of the report

Portfolio construction is important to minimize the risk of expected return. By making an efficient portfolio, an investor becomes able to minimize his or her risk, predict the expected return of portfolio, can take safety measure to minimize the risk etc. As an important part of the course of Security Pricing & Portfolio Theory (F-407); our honorable course teacher asked me to construct a portfolio & analyze on it. So, to fulfill the requirement of the course, I constructed a portfolio & made analysis that was asked over it. From the inspiration of it and the bindings made me eager to perform this assignment.

Objectives of the Report

To construct an efficient portfolio- is the main objective of making this report which (1) minimizes risk without short sell; (2) minimizes risk with short sell; (3) minimizes risk without short sell with a given return; (4) minimizes risk with short sell with a given return; (5) maximizes Theta without short sell and (6) maximizes Theta with short sell (7) maximizes return at given risk without short sell (8) maximizes return at given risk with short sell.

Methodology

The methodologies taken to construct my portfolio are as follows:

* Asset class selection

* Individual asset selection.

* Closing price collection of the selected stocks for year 2006-2010

* Dividend adjustment

* Monthly return and average monthly return calculation for each stock

* Risk free rate of return calculation

* excess return calculation

* Weighting each stocks & Excess Portfolio Return Calculation

* Variance-covariance matrix preparation and calculation of portfolio variance, standard deviation and theta

* Using solver function to find out the efficient portfolio in different situations

Limitation of the study:

* Limited time

* Lack of knowledge

* Lack of experience

Portfolio management is the management of combination between different...