The purpose of this assignment is to build your practical understanding of portfolio op- timization and performance evaluation. Part I of this

Equally weighted portfolio requires equal distribution of the available

fund (AUD 500 million) on 13 April 2012 and generate risk-return measures using this

naive strategy. (250 words = 10 marks)


Assuming no short-sale is permitted, you are required to construct an ecient frontier

using the continuously compounded return data from 13 April 2012 to 13 April 2017 for

dierent target return. You are required to use target returns of 1%, 2%, 3%, 4%, 5%,

6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14%, 15%, 16%, 17%, 18%, 20% and 25% using

the 10 stocks identied above. Please note that there may not be convergence at certain

target returns and you are required to report evidence of convergence or convergence

failure at these target returns in an appendix. If there is no convergence achieved at a

given target return clearly identify the target returns that fail to achieve convergence in a

table for those respective target returns. Provide details (weights, and annualized return

and standard deviations) of the ecient portfolios forming the frontier for those target

returns that achieve convergence and you are advised to present these estimation output

in an appendix (please maintain neatness and readability of the estimation output with

respect to individual target returns). Having completed these estimation procedures, you

are required to comment on the performance of these portfolios using dierent perfor-

mance measures ( such as return, risk, portfolio beta, Sharpe ratio and Treynor ratio).

[750 words – 25 marks]


Generate the global minimum variance portfolio that sits at the point of the ecient

frontier and comment on the performance of this portfolio. (250 words = 15 marks)