PMMF 4 StockData

Computation of Variance-Covariance Matrix by using MMULT Function
Price Data
Stocks
Date
A B B India Ltd.Aarti IndustriesApollo
Ltd. Tyres Ltd.Arvind Ltd. Ashok Leyland Ltd.
Jan-01
53.04
5.65
8.06
14.02
2.31
Jan-02
44.43
5.83
7.46
11
3.46
Jan-03
55.82
10.53
12.53
20.85
4.75
Jan-04
134.49
31.74
24.48
51.3
11.49
Jan-05
194.94
56.13
26.43
122.25
12.07
Jan-06
505.84
79.15
31
93.3
15.32
Jan-07
724.07
30.15
33.67
59.3
24.2
Jan-08
1119.9
41.8
44.6
46.15
16.98
Jan-09
485.15
28.9
17.55
14.1
7.05
Jan-10
811
47
53.05
37.7
25.13
Jan-11
732.35
53.2
51.2
64.25
29.48
Jan-12
816.3
55.75
72.45
96.5
27.25
Returns
Date
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Mean
Variance
SD

-17.71%
3.14%
-7.74%
-24.26%
40.40%
22.82%
59.12%
51.86%
63.95%
31.69%
87.94%
110.33%
66.97%
90.03%
88.33%
37.12%
57.01%
7.66%
86.84%
4.92%
95.35%
34.37%
15.95%
-27.02%
23.84%
35.87%
-96.52%
8.26%
-45.32%
45.72%
43.61%
32.67%
28.11%
-25.07%
-35.43%
-83.65%
-36.91%
-93.27%
-118.57%
-87.90%
51.38%
48.63%
110.62%
98.35%
127.10%
-10.20%
12.39%
-3.55%
53.31%
15.96%
10.85%
4.68%
34.72%
40.68%
-7.87%
24.85%
0.25292
50.29%
20.81%
0.29631
54.43%
19.96%
0.26175
51.16%
17.54%
0.48583
69.70%
22.43%
0.33040
57.48%
Excess Returns
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12

-42.57%
-17.67%
-27.70%
-41.80%
17.97%
-2.03%
38.31%
31.89%
46.41%
9.25%
63.08%
89.52%
47.01%
72.50%
65.90%
12.27%
36.20%
-12.30%
69.30%
-17.51%
70.50%
13.56%
-4.01%
-44.56%
1.41%
11.01%
-117.33%
-11.70%
-62.86%
23.28%
18.76%
11.86%
8.15%
-42.61%
-57.87%
-108.51%
-57.72%
-113.23%
-136.11%
-110.34%
26.53%
27.82%
90.65%
80.81%
104.67%
-35.05%
-8.42%
-23.51%
35.78%
-6.47%
-14.00%
-16.13%
14.75%
23.14%
-30.30%
Variance-Covariance Matrix
A B B India Ltd.
Aarti Industries Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
Bajaj Holdings & Invst. Ltd.

0.25292
0.14174
0.18979
0.17810
0.17829
0.14174
0.29631
0.15907
0.27210
0.11727
0.18979
0.15907
0.26175
0.27999
0.24048
0.17810
0.27210
0.27999
0.48583
0.26725
0.17829
0.11727
0.24048
0.26725
0.33040
0.34601
0.19750
0.35652
0.39809
0.42017
Variance-Covariance Matrix in single step: Directly from returns

A B B India Ltd.
0.25292
0.14174
0.18979
0.17810
0.17829
0.14174
0.29631
0.15907
0.27210
0.11727
Apollo Tyres Ltd.
0.18979
0.15907
0.26175
0.27999
0.24048
Arvind Ltd.
0.17810
0.27210
0.27999
0.48583
0.26725
Ashok Leyland Ltd.
0.17829
0.11727
0.24048
0.26725
0.33040
0.34601
0.19750
0.35652
0.39809
0.42017
Index
Bajaj Holdings & CNX500_Index
Invst. Ltd.
297.9
981.2
437.95
714.5
513.4
749.1
999.05
1459.8
1039.2
1768.25
2154.65
2585.95
2772.15
3393.1
2359.05
4349
229.3
2209.05
564.75
4156.05
727.45
4424.6
670.7
4082.85
Bajaj Holdings & CNX500_Index

Invst. Ltd.
38.53%
-31.72%
15.90%
4.73%
66.57%
66.72%
3.94%
19.17%
72.92%
38.01%
25.20%
27.17%
-16.14%
24.82%
-233.10%
-67.74%
90.14%
63.20%
25.32%
6.26%
-8.12%
-8.04%
7.38% <-- =AVERAGE(G19:G29)
0.74965 <-- =VAR(G19:G29)
86.58% <-- =SQRT(G32)

31.16%
8.52%
59.20%
-3.44%
65.54%
17.82%
-23.51%
-240.48%
82.76%
17.94%
-15.50%

0.34601
0.19750
0.35652
0.39809
0.42017
0.74965

0.34601
0.19750
0.35652
0.39809
0.42017
0.74965
Regarding M and M-1

Returns
Date
A B B India Ltd.Aarti Industries
Apollo
Ltd.TyresArvind
Ltd. Ltd. Ashok Leyland
Bajaj
Ltd.
Holdings & Invst. Ltd.
Jan-02
-17.71%
3.14%
-7.74%
-24.26%
40.40%
38.53%
Jan-03
22.82%
59.12%
51.86%
63.95%
31.69%
15.90%
Jan-04
87.94% 110.33%
66.97%
90.03%
88.33%
66.57%
Jan-05
37.12%
57.01%
7.66%
86.84%
4.92%
3.94%
Jan-06
95.35%
34.37%
15.95%
-27.02%
23.84%
72.92%
Jan-07
35.87%
-96.52%
8.26%
-45.32%
45.72%
25.20%
Jan-08
43.61%
32.67%
28.11%
-25.07%
-35.43%
-16.14%
Jan-09
-83.65%
-36.91%
-93.27% -118.57%
-87.90%
-233.10%
Jan-10
51.38%
48.63% 110.62%
98.35% 127.10%
90.14%
Jan-11
-10.20%
12.39%
-3.55%
53.31%
15.96%
25.32%
Jan-12
10.85%
4.68%
34.72%
40.68%
-7.87%
-8.12%
Mean

Apollo
Ltd.TyresArvind
Bajaj
Ltd.
24.85%
20.81%
19.96%
17.54%
22.43%
7.38% <-- =AVERAGE(G4:G14)
24.85%
20.81%
19.96%
17.54%
22.43%
7.38%
Variance

Apollo
Ltd.TyresArvind
Bajaj
Ltd.
0.25292
0.29631
0.26175
0.48583
0.33040
0.74965 <-- =VAR(G4:G14)
0.2299
0.2694
0.2380
0.4417
0.3004
0.6815 <-- =VARP(G4:G14)
0.2299
0.2694
0.2380
0.4417
0.3004
0.6815 <-- =COVAR(G4:G14,G4:G
0.2529
0.2963
0.2618
0.4858
0.3304
0.7497 <-- =COVAR(G4:G14,G4:G
Standard Deviation A B B India Ltd.Aarti Industries

Apollo
Ltd.TyresArvind
Bajaj
Ltd.
50.29%
54.43%
51.16%
69.70%
57.48%
86.58% <-- =STDEV(G4:G14)
47.95%
51.90%
48.78%
66.46%
54.81%
82.55% <-- =STDEVP(G4:G14)
47.95%
51.90%
48.78%
66.46%
54.81%
82.55%
Covariance (ABB India Ltd., Aarti Industries)
0.12885 <-- =COVAR(B4:B14,C4:C14)
0.14174 <-- {=MMULT(TRANSPOSE(B4:B14-B17),C4:C14-C17)/(COUNT(A4:A14)-1)}
0.12885
& Invst. Ltd.
& Invst. Ltd.

<-- =AVERAGE(G4:G14)
& Invst. Ltd.

<-- =VAR(G4:G14)
<-- =VARP(G4:G14)
<-- =COVAR(G4:G14,G4:G14)
<-- =COVAR(G4:G14,G4:G14)*(COUNT(F4:F14)/(COUNT(F4:F14)-1))
& Invst. Ltd.
<-- =STDEV(G4:G14)
<-- =STDEVP(G4:G14)
Use of offset and covar functions to compute variance-covariance Matrix

Returns
Date
A B B India Aarti
Ltd. Industries
Apollo
Ltd.
TyresArvind
Bajaj
Ltd.
Jan-02 -17.71%
3.14%
-7.74% -24.26%
40.40%
38.53% <-- =Sheet1!G19
Jan-03
22.82%
59.12%
51.86%
63.95%
31.69%
15.90%
Jan-04
87.94% 110.33%
66.97%
90.03%
88.33%
66.57%
Jan-05
37.12%
57.01%
7.66%
86.84%
4.92%
3.94%
Jan-06
95.35%
34.37%
15.95% -27.02%
23.84%
72.92%
Jan-07
35.87% -96.52%
8.26% -45.32%
45.72%
25.20%
0.128851
Jan-08
43.61%
32.67%
28.11% -25.07% -35.43% -16.14%
Jan-09 -83.65% -36.91% -93.27% -118.57% -87.90% -233.10%
Jan-10
51.38%
48.63% 110.62%
98.35% 127.10%
90.14%
Jan-11 -10.20%
12.39%
-3.55%
53.31%
15.96%
25.32%
Jan-12
10.85%
4.68%
34.72%
40.68%
-7.87%
-8.12%
Use of Offset
A B B India Aarti
Ltd. Industries
Apollo
Ltd.
TyresArvind
Bajaj
Ltd.
0
1
2
3
4
5
A B B India Ltd.
0 0.252915 0.141736 0.189788 0.178096 0.178288 0.346012 <-- =COVAR(OFFSET($B$4:$B$
Aarti Industries Ltd. 1 0.141736 0.296311 0.159072 0.272104 0.117267
0.1975
Apollo Tyres Ltd.
2 0.189788 0.159072 0.261752 0.279987 0.240482 0.356518
Arvind Ltd.
3 0.178096 0.272104 0.279987 0.485829 0.267251 0.398094
Ashok Leyland Ltd.
4 0.178288 0.117267 0.240482 0.267251 0.330398 0.420166
5 0.346012
0.1975 0.356518 0.398094 0.420166 0.74965
0.159072 <-- =COVAR(C4:C14,D4:D14)*COUNT(A4:A14)/(COUNT(A4:A14)-1)
ngs & Invst. Ltd.

<-- =COVAR(OFFSET($B$4:$B$14,0,H$18),OFFSET($B$4:$B$14,0,$B19))*COUNT($A$4:$A$14)/(COUNT($A$4:$A$14)-1)
($A$4:$A$14)-1)
Computation of GMVP
Sample Variance-Covariance Matrix
A B B India Ltd.
Aarti Industries
Apollo
Ltd.TyresArvind
Bajaj
Ltd.
A B B India Ltd.
0.252915 0.141736 0.189788 0.178096 0.178288 0.3460123
0.141736 0.296311 0.159072 0.2721038 0.117267 0.1975004
Apollo Tyres Ltd.
0.189788 0.159072 0.261752 0.2799873 0.240482 0.356518
Arvind Ltd.
0.178096 0.272104 0.279987 0.485829 0.267251 0.3980935
Ashok Leyland Ltd.
0.178288 0.117267 0.240482 0.2672513 0.330398 0.420166
0.346012
0.1975 0.356518 0.3980935 0.420166 0.7496501
Mean Return
24.85%
20.81%
19.96%
17.54%
22.43%
7.38%
GMVP
0.64998
0.22065
0.14838
-0.06091
0.62480
-0.58290
Sum
100.00% <-- =SUM(B13:G13)
GMVP Mean
GMVP Variance
GMVP SD
Envelope Portfolio X
Constant
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
32.36% <-- =SUMPRODUCT(B13:G13,B11:G11)

0.122681 <-- {=MMULT(B13:G13,MMULT(B4:G9,TRANSPOSE(B13:G13)))}
35.03%
7.00%
Num
2.398575
-0.070837
-0.384564
0.26745
2.044798
-2.188605
X_Mean
X_Variance
X_SD
Envelope Portfolio Y
Constant
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
Y_Mean
Weights of X
1.160517 <-- =B24/SUM($B$24:$B$29)
-0.034274
-0.186066
0.129402
0.989346
-1.058926
1 <-- =SUM(C24:C29)
MeanRet
0.2485214
0.2081111
0.1996348
0.1753689
0.224346
0.0737786
41.07% <-- =SUMPRODUCT(C24:C29,G24:G29)

0.164823 <-- {=MMULT(TRANSPOSE(C24:C29),MMULT(B4:G9,C24:C29))}
40.60% <-- =SQRT(C33)
9.00%
Num
2.292613
-0.106809
-0.408753
0.27738
1.94294
-2.093579
Weights
1.204235
-0.056103
-0.214705
0.145699
1.020563
-1.099689
1 <-- =SUM(C40:C45)
41.81% <-- =SUMPRODUCT(C40:C45,G24:G29)
Y_Variance
Y_SD

41.51% <-- =SQRT(C48)
Cov(X,Y)
Single Portfolio Calculation

Prop in X
P_Mean
P_Variance
P_SD
45.00%
0.1
41.74%
0.171569
41.42%
<-<-<-<--
0.1
40.00%
=(B54*C32)+((1-B54)*C47)
35.00%
=(B54^2*C33)+((1-B54)^2*C48)+(2*C51*B54*(1-B54))
=SQRT(B56)
Data Table: Changing the prop of X

Prop in X
P_SD
P_Mean
41.42%
41.74%
-0.5
41.99%
42.18%
-0.2
41.70%
41.96%
0.1
41.42%
41.74%
0.4
41.14%
41.51%
0.7
40.87%
41.29%
1
40.60%
41.07%
1.3
40.33%
40.84%
1.6
40.08%
40.62%
1.9
39.82%
40.39%
2.2
39.57%
40.17%
2.5
39.33%
39.95%
2.8
39.09%
39.72%
3.1
38.86%
39.50%
3.4
38.64%
39.28%
3.7
38.42%
39.05%
4
38.20%
38.83%
4.3
38.00%
38.60%
4.6
37.79%
38.38%
4.9
37.60%
38.16%
5.2
37.41%
37.93%
5.5
37.23%
37.71%
5.8
37.05%
37.49%
6.1
36.89%
37.26%
6.4
36.72%
37.04%
6.7
36.57%
36.81%
7
36.42%
36.59%
7.3
36.28%
36.37%
7.6
36.15%
36.14%
7.9
36.02%
35.92%
8.2
35.90%
35.70%
8.5
35.79%
35.47%
8.8
35.68%
35.25%
9.1
35.59%
35.02%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
34.00%
35.00%
36.00%
9.4
9.7
10
10.3
10.6
10.9
11.2
11.5
11.8
12.1
12.4
12.7
13
13.3
13.6
13.9
14.2
14.5
14.8
15.1
15.4
GMVP
35.50%
35.41%
35.34%
35.27%
35.22%
35.17%
35.12%
35.09%
35.06%
35.04%
35.03%
35.03%
35.03%
35.04%
35.06%
35.09%
35.13%
35.17%
35.22%
35.28%
35.35%
35.03%
34.80%
34.58%
34.35%
34.13%
33.91%
33.68%
33.46%
33.23%
33.01%
32.79%
32.56%
32.34%
32.12%
31.89%
31.67%
31.44%
31.22%
31.00%
30.77%
30.55%
30.33%
32.36%

One
1
1
1
1
1
1
<-- =Sheet1!G31
<-- {=MMULT(TRANSPOSE(I4:I9),MINVERSE(B4:G9))/MMULT(TRANSPOSE(I4:I9),MMULT(MINVERSE(B4:G9),I4:I9))}
E(B13:G13)))}
MMULT(B4:G9,C24:C29))}
36.00%
37.00%
38.00%
39.00%
40.00%
41.00%
42.00%
43.00%
NVERSE(B4:G9),I4:I9))}
Single Index Model

Returns
Date
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
A B B India Aarti
Ltd. Industries
Apollo
Ltd.
TyresArvind
Bajaj
Ltd.
Holdings
CNX500_Index
& Invst. Ltd.
-17.71%
3.14%
-7.74% -24.26%
40.40%
38.53% -31.72%
22.82%
59.12%
51.86%
63.95%
31.69%
15.90%
4.73%
87.94% 110.33%
66.97%
90.03%
88.33%
66.57%
66.72%
37.12%
57.01%
7.66%
86.84%
4.92%
3.94%
19.17%
95.35%
34.37%
15.95% -27.02%
23.84%
72.92%
38.01%
35.87% -96.52%
8.26% -45.32%
45.72%
25.20%
27.17%
43.61%
32.67%
28.11% -25.07% -35.43% -16.14%
24.82%
-83.65% -36.91% -93.27% -118.57% -87.90% -233.10% -67.74%
51.38%
48.63% 110.62%
98.35% 127.10%
90.14%
63.20%
-10.20%
12.39%
-3.55%
53.31%
15.96%
25.32%
6.26%
10.85%
4.68%
34.72%
40.68%
-7.87%
-8.12%
-8.04%
Mean Return
Variance
SD
24.85%
20.81%
19.96%
17.54%
22.43%
7.38%
12.96%
0.252915 0.296311 0.261752 0.485829 0.330398 0.74965 0.154846
0.502907 0.544345 0.511617 0.697014 0.574803 0.865823 0.393504
Alpha
Beta
0.096604 0.117911 0.059045 0.027906 0.081402 -0.15293

1.172056 0.695903 1.084663 1.137696 1.102825 1.749095
Single Index Estimates

Mean Return
Variance of Returns
24.85%
20.81%
19.96%
17.54%
22.43%
0.252915 0.296311 0.261752 0.485829 0.330398
7.38%
0.74965
0
1
12.96%
Single Index Model

Var-Covar Matrix
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
A B B India Aarti
Ltd. Industries
Apollo
Ltd.
TyresArvind
Bajaj
Ltd.
0.252915 0.126298 0.196853 0.206478 0.200149 0.317439
0.126298 0.296311 0.116881 0.122595 0.118838 0.188478
0.196853 0.116881 0.261752 0.191082 0.185225 0.29377
0.206478 0.122595 0.191082 0.485829 0.194282 0.308133
0.200149 0.118838 0.185225 0.194282 0.330398 0.298689
0.317439 0.188478 0.29377 0.308133 0.298689 0.74965
CNX500_Index
ngs & Invst. Ltd.
e_ABB
0.098032
0.076187
0.000778
0.049925
0.411423
-0.05633
0.048596
-0.13921
-0.32354
-0.272
0.106134
e_Aarti
0.134186
0.440391
0.521144
0.318783
-0.03875
-1.27211
0.036076
-0.01557
-0.07142
-0.03757
-0.01515
0.207645
0.408232
-0.11298
-0.19032
-0.31184
-0.27108
-0.04713
-0.25699
0.361626
-0.16246
0.375302
0.090374
0.557752
0.113381
0.622386
-0.73059
-0.79017
-0.561
-0.44297
0.236553
0.43398
0.470309
0.672427
0.183322
0.066145
-0.24356
-0.26215
0.076208
-0.70944
-0.21338
0.492644
0.009194
-0.07141
1.09308
0.229169
-0.34828
-0.14295
0.217274
-0.07022
-0.44256
-0.99324
-0.05115
0.296575
0.212309
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.040202 0.221323 0.079577 0.285404 0.142071 0.275926
0.200503 0.470449 0.282093 0.534232 0.376923 0.525286
Risk-Free
Cut-Off
Stock
Mean Return
A B B India Ltd.
0.2485214
0.2081111
Apollo Tyres Ltd.
0.1996348
Arvind Ltd.
0.1753689
Ashok Leyland Ltd.
0.2243460
0.0737786
0.05
0.15
Beta
1.172056
0.695903
1.084663
1.137696
1.102825
1.749095
Determination of Optimal Portfolio using Single Index Model

Variance(Market)
0.154845673
Var(error) Excess Return ExcessRet/Beta
0.040202
0.1985214
0.169378833
0.221323
0.1581111
0.227202624
0.079577
0.1496348
0.137955073
0.285404
0.1253689
0.110195453
0.142071
0.1743460
0.15809037
0.275926
0.0237786
0.013594777
My portfolio should contain the stocks where Excess Return/Beta is more than the cutt-off
Determination of Cut-Off Rate
1
2
3
Stock
ExcessRet/BetaBeta
A B B India Ltd.
0.16937883 1.172056
Aarti Industries Ltd. 0.22720262 0.695903
Apollo Tyres Ltd.
0.13795507 1.084663
Arvind Ltd.
0.11019545 1.137696
Ashok Leyland Ltd. 0.15809037 1.102825
Bajaj Holdings & Invst. 0.01359478
Ltd.
1.749095
4
5
6
Var(error) Excess Return ExcessReturn/Var(error)*Beta
0.040202
0.198521417
5.787786379
0.221323
0.158111079
0.497147926
0.079577
0.149634828
2.039583985
0.285404
0.125368921
0.499753344
0.142071
0.174346
1.353357014
0.275926
0.023778553
0.150732359
Optimal Portfolio Weights: When Short selling is not allowed

Stocks Selected
Rank
A B B India Ltd.
Ashok Leyland Ltd.
Beta
Var(error) ExcessRet/Beta (ExcessRet/Beta)-C
1 0.695903 0.221323
0.227202624
0.077202624
2 1.172056 0.040202
0.169378833
0.019378833
3 1.102825 0.142071
0.15809037
0.00809037
Optimal Portfolio Weights: When Short selling is allowed

Cut-Off
0.12628741
When Short is not allowed When Short Selling is allowed
Stock
ExcessRet/BetaVar(error) Z
Weights
Beta/Var
Aarti Industries Ltd. 0.22720262 0.221323 0.242748
0.278851039
3.144295326
A B B India Ltd.
0.16937883 0.040202 0.56498
0.64900738
29.15446838
Ashok Leyland Ltd.
0.15809037 0.142071 0.062801
0.072141581
7.762478155
Apollo Tyres Ltd.
0.13795507 0.079577
0
0
13.63040949
Arvind Ltd.
0.11019545 0.285404
0
0
3.986261837
Bajaj Holdings & Invst. 0.01359478
Ltd.
0.275926
0
0
6.339004664
Single Index Model
7
8
Beta^2/Var(error)
Cum_6
34.17066 5.787786
2.188126 6.284934
14.78441 8.324518
4.535154 8.824272
8.560654 10.17763
11.08752 10.32836
9
Cum_7
34.17066
36.35878
51.14319
55.67835
64.239
75.32652
Beta/Var(error)
Z
3.144295 0.242748
29.15447 0.56498
7.762478 0.062801
Weights
0.278851
0.649007
0.072142
ng is allowed
Z
Weights
0.317307
0.2642
1.256307 1.046039
0.24687 0.205551
0.159035 0.132417
-0.06415 -0.05341
-0.71436
-0.5948
10
Ci
0.142456
0.146787
0.14452
0.142015
0.143961
0.126287
Returns
Date
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
A B B India Ltd. Aarti Industries Ltd. Apollo Tyres Ltd. Arvind Ltd.
-17.71%
3.14%
-7.74%
-24.26%
22.82%
59.12%
51.86%
63.95%
87.94%
110.33%
66.97%
90.03%
37.12%
57.01%
7.66%
86.84%
95.35%
34.37%
15.95%
-27.02%
35.87%
-96.52%
8.26%
-45.32%
43.61%
32.67%
28.11%
-25.07%
-83.65%
-36.91%
-93.27%
-118.57%
51.38%
48.63%
110.62%
98.35%
-10.20%
12.39%
-3.55%
53.31%
10.85%
4.68%
34.72%
40.68%
Mean
Variance
SD
24.85%
25.29%
50.29%
avg corr
CORR
0.146538445
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
20.81%
29.63%
54.43%
19.96%
26.18%
51.16%
17.54%
48.58%
69.70%
1.419223343
0.704696098
1.036948139 0.6236148
0.704696098
1.311445756
0.770898587 0.8574037
1.036948139
0.770898587
1.392837595
0.957992
0.623614754
0.857403747
0.957991978 1.1183602
0.817912956
0.480246839
1.076048618 0.7843946
0.913030255
0.471995361
0.920600391 0.7060393
A B B India Ltd. Aarti Industries Ltd.

#NAME?
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

CNX500_Index
40.40%
38.53%
-31.72%
31.69%
15.90%
4.73%
88.33%
66.57%
66.72%
4.92%
3.94%
19.17%
23.84%
72.92%
38.01%
45.72%
25.20%
27.17%
-35.43%
-16.14%
24.82%
-87.90%
-233.10%
-67.74%
127.10%
90.14%
63.20%
15.96%
25.32%
6.26%
-7.87%
-8.12%
-8.04%
22.43%
33.04%
57.48%
7.38% <-- =AVERAGE(G19:G29)

74.97% <-- =VAR(G19:G29)
86.58% <-- =SQRT(G32)

0.817912956
0.913030255
0.480246839
0.471995361
1.076048618
0.920600391
0.784394627
0.70603928
1.254178289
0.939033111
0.939033111
1.034549356
Ashok Leyland Ltd.
Returns
Date
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Mean
Variance
SD
Avg Correlation
-17.71%
3.14%
-7.74%
-24.26%
22.82%
59.12%
51.86%
63.95%
87.94%
110.33%
66.97%
90.03%
37.12%
57.01%
7.66%
86.84%
95.35%
34.37%
15.95%
-27.02%
35.87%
-96.52%
8.26%
-45.32%
43.61%
32.67%
28.11%
-25.07%
-83.65%
-36.91%
-93.27%
-118.57%
51.38%
48.63%
110.62%
98.35%
-10.20%
12.39%
-3.55%
53.31%
10.85%
4.68%
34.72%
40.68%
24.85%
25.29%
50.29%
20.81%
29.63%
54.43%
19.96%
26.18%
51.16%
17.54%
48.58%
69.70%
0.546428792
Correlation
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
1
0.517747003
0.737624828 0.5080717
0.517747003
1
0.571180757 0.7171644
0.737624828
0.571180757
1 0.7851484
0.508071668
0.717164417
0.785148354
1
0.61676007
0.374784539
0.817748568 0.6670515
0.79464783
0.419048757
0.804835833 0.6596508
Var-Covar Matrix
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
0.252915313
0.149587513
0.140593756 0.1915415
0.149587513
0.296311433
0.152178282
0.207324
0.140593756
0.152178282
0.26175187 0.1948589
0.191541495
0.207323969
0.194858882
0.485829
0.15795737
0.170972609
0.1606931 0.2189243
0.237930681
0.257535493
0.242051502
0.329765

CNX500_Index
40.40%
38.53%
-31.72%
31.69%
15.90%
4.73%
88.33%
66.57%
66.72%
4.92%
3.94%
19.17%
23.84%
72.92%
38.01%
45.72%
25.20%
27.17%
-35.43%
-16.14%
24.82%
-87.90%
-233.10%
-67.74%
127.10%
90.14%
63.20%
15.96%
25.32%
6.26%
-7.87%
-8.12%
-8.04%
22.43%
33.04%
57.48%
7.38%
74.97%
86.58%

0.61676007
0.79464783
0.374784539
0.419048757
0.817748568
0.804835833
0.667051479
0.659650763
1
0.844253394
0.844253394
1

0.15795737
0.237930681
0.170972609
0.257535493
0.1606931
0.242051502
0.21892435
0.329765047
0.330398081
0.271945354
0.271945354
0.749650131
Optimization using Constant Correlation Model

Risk-Free Rate
Stock
A B B India Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
Ashok Leyland Ltd.
Ri
0.248521
0.208111
0.199635
0.175369
0.224346
0.073779
Determination of cut-off rate

Average Correlation
SD
0.502907
0.544345
0.511617
0.697014
0.574803
0.865823
Ri-Rf
0.198521
0.158111
0.149635
0.125369
0.174346
0.023779
(Ri-Rf)/SD
0.394748
0.290461
0.292474
0.179866
0.303315
0.027464
4
r/(1-r+i*r)
0.546429
0.353349
0.261092
0.207037
0.171525
0.146411
5 4*5
Cum_2
Ci
0.394748 0.215702
0.698062 0.24666
0.990537 0.258621
1.280998 0.265213
1.460864 0.250574
1.488327 0.217908
0.546429
1
Stock
A B B India Ltd.
Ashok Leyland Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
0.05
2
(Ri-Rf)/SD i
0.394748
0.303315
0.292474
0.290461
0.179866
0.027464
3
1
2
3
4
5
6
Computing weights for optimal portfolio
Stock
A B B India Ltd.
Ashok Leyland Ltd.
Apollo Tyres Ltd.
Arvind Ltd.
SD
0.502907
0.574803
0.511617
0.544345
0.697014
0.865823
(Ri-Rf)/SD
0.394748
0.303315
0.292474
0.290461
0.179866
0.027464
When short selling is not allowed

1/((1-r)SD) Zi
Weights
4.383964 0.567874 0.608164
3.835622 0.146141 0.15651
4.309329 0.117476 0.125811
4.050236 0.102259 0.109515
3.163099
0
0
2.546392
0
0
select
select
select
select
t selling is not allowed
Cut-off rate
0
When short selling is allowed
Zi
Weights
0.775259 0.696704
0.327586 0.294393
0.32133 0.28877
0.293857 0.264081
-0.12033 -0.10814
-0.48495 -0.43581

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Computation of Variance-Covariance Matrix by using MMULT Function

A B B India Ltd.Aarti IndustriesApollo

A B B India Ltd.Aarti IndustriesApollo

A B B India Ltd.Aarti IndustriesApollo

Variance-Covariance Matrix in single step: Directly from returns

Bajaj Holdings & CNX500_Index

Bajaj Holdings & Invst. Ltd.

Bajaj Holdings & Invst. Ltd.

Bajaj Holdings & Invst. Ltd.

Regarding M and M-1

A B B India Ltd.Aarti Industries

A B B India Ltd.Aarti Industries

Standard Deviation A B B India Ltd.Aarti Industries

& Invst. Ltd.

& Invst. Ltd.

& Invst. Ltd.

Use of offset and covar functions to compute variance-covariance Matrix

0.159072 <-- =COVAR(C4:C14,D4:D14)*COUNT(A4:A14)/(COUNT(A4:A14)-1)

ngs & Invst. Ltd.

100.00% <-- =SUM(B13:G13)

32.36% <-- =SUMPRODUCT(B13:G13,B11:G11)

41.07% <-- =SUMPRODUCT(C24:C29,G24:G29)

0.172349 <-- {=MMULT(TRANSPOSE(C40:C45),MMULT(B4:G9,C40:C45))}

0.168431 <-- {=MMULT(TRANSPOSE(C24:C29),MMULT(B4:G9,C40:C45))}

Single Portfolio Calculation

Data Table: Changing the prop of X

Bajaj Holdings & Invst. Ltd.

Single Index Model

0.096604 0.117911 0.059045 0.027906 0.081402 -0.15293

Single Index Estimates

Single Index Model

ngs & Invst. Ltd.

Determination of Optimal Portfolio using Single Index Model

Optimal Portfolio Weights: When Short selling is not allowed

Optimal Portfolio Weights: When Short selling is allowed

Single Index Model

A B B India Ltd. Aarti Industries Ltd.

Apollo Tyres Ltd.

Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

7.38% <-- =AVERAGE(G19:G29)

Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

Ashok Leyland Ltd.

Bajaj Holdings & Invst. Ltd.

Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

Ashok Leyland Ltd. Bajaj Holdings & Invst. Ltd.

Optimization using Constant Correlation Model

Determination of cut-off rate

Computing weights for optimal portfolio

When short selling is not allowed

t selling is not allowed

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