FIN136, Spring 2013
Project: Constructing a Three-Stock Optimal Portfolio
You have ten stocks
Due Date May 3 2013
(note below) to choose from to construct a 3-asset optimal portfolio. Please:
1. Prepare a written report to recommend an optimal portfolio.
2. Present an Excel file with worksheet(s) to support your recommendation.
must be submitted together on or before the project due date. Late submissions will not be
Written Report (50 points)
The report shall be in a Memo format with 12ft-size and double spacing. A sample memo is
attached at the end of this document. You can find the same copy at the end of the syllabus. The
The written report and the Excel file text must not exceed 2 pages, including all figures, tables graphs and etc.
The written report will be graded on clarity and effectiveness of the argument. You should
clearly describe your portfolio, for example, the component stocks, portfolio asset allocations,
and etc. You should justify your recommendation, for example, by explaining the rational of
your choice of the stocks, by presenting the evidence such as the correlation coefficients among
stocks, and portfolio’s expected performance and etc. When you state an opinion, make sure that
you have convincing evidence and analysis to support your statement.
We are going to use the ten contestant stocks the Investorplace.com has picked as the hopefuls
to be the best buy-and-hold stock for Year 2013 – they are meant to be long-term investment (1
year for the contest) for people to buy and sit on them for the entire year. You can find more
information on these stocks from the reading material “10 Experts Pick the 10 Best Stocks for
The written report and the Excel file
Excel worksheet (50 points)
The Excel worksheet should be as detailed as possible to provide evidence support to your
decision making process. Please submit only one Excel file – multiple worksheets are fine.
The Excel worksheet will be graded on clarity and easiness to comprehend. It should contain
sufficient relevant information for readers to make an informed assessment of the quality of the
recommended optimal portfolio. Below is a list of the things suggested for you to include in the
Excel work file. This list is not exhaustive. You are encouraged to add other relevant information
as you see fit.
1. Historical price and return information of the stocks included in the portfolio.
2. Risk-free rate.
3. Summary statistics of the stocks, such as average return, variance, standard deviation,
covariance and correlation.
4. Sharpe ratio of the portfolio.
5. Plot of the opportunity set of the portfolio.
6. Plot of the Capital Allocation Line
7. Identification of the minimum variance portfolio and optimal portfolio.
Please make sure to explain the variables you use and clearly indicate the unit of measurement,
frequency, time period of the data set involved.
Automation feature – where readers can easily switch stocks and see the resulting portfolio
performance – will receive extra credit.
Page 2 of 2
To: FIN 136 students
Subject: Memo format for the project report
Date: The report submission date
The purpose of this page is to illustrate the memo format expected for the project written
report. No cover page is needed. Text should be 12ft-sized with double spacing. The report
should not exceed 2 pages.
You should submit the written report on or before the due date. Late submission will not