Using weekly price data of the 30 Dow Jones Industrial Average (DJIA) stocks for the past three years, construct the portfolios listed below.
Portfolios Structure: 6 portfolios of 5 stocks, 3 portfolios of 10 stocks, 2 portfolios of 15 stocks, and 1 portfolio of 30 stocks
– For the portfolios, compute the returns, standard deviations and coefficient of
risk variation.
– Analyze the risk and return patterns and diversification benefits.
– Based on the risk/return analysis, which portfolio selections are the most
profitable?
– How do the portfolios’ performances compare to the SP 500’s?
– What are the advantages and disadvantages of including international stocks
in the portfolio?
– If Mr. Smith chooses to include foreign stocks in the portfolio, how can he use
derivatives to hedge against currency risk which can be present from
international investing?
Meet the following requirements:
Be two or three pages in length for the analysis and explanations
Include Excel spreadsheets with data, portfolios, and risk and return computations; these spreadsheets should be embedded in the Word document as an appendix after your analysis and explanations
Include a minimum of three credible references.
