Efficient Portfolio Construction

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    14-Oct-2014

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Mohammed Robiul Alam 13-024 Department of Finance University of Dhaka

Selected Sector POWER REAL ESTATE TANNERY INSURANCE PHARMACUITICLES ENGINEERING MISCELLANEOUS CEMENT BANK FINANCIAL

Selected CompanyBOC BANGLADESH EASTERN HOUSING LIMITED APEX TANNERY LIMITED FAREAST ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUSTRIES LIMITED ATLAS BANGLADESH LIMITED. USMANIA GLASS SHEET FACTORY LIMITED CONFIDENCE CEMENT NATIONAL BAN LIMITED. IDLC FINANCE LIMITED

Selection Criteria Listed In DSE Listed on Before 1 January 2006 A Category Stock Steadiness in EPS and NAV Stability in Dividend Pattern

Data Collection and Formation

Five years daily trade data from 1st January 2006 to 31st

December 2010Day wise closing price of each company Adjusted dividend with daily closing price Averaged daily adjusted price for monthly price date

Dividend AdjustmentCash Dividend:

Bonus Share:

Right Share:

Spilt:Dividend Adjustment

Use spilt ratio

Dividend Adjusted Data

Return CalculationReturn = LN(Price of X month/Price of X-1 month)

Return Calculation

Risk Free Rate of ReturnYear Six Month T-Bill 2010 0.0485 2009 0.0575 2008 0.058 2007 0.0582 2006 0.0585

Rf Monthly

0.004675

Excess Return and Covariance Matrix

Equal investment in each security Excess Portfolio Return Portfolio Variance Portfolio Standard Deviation Theta Wi 0.0374051 0.0044756 0.06689995 0.559 995

Scenario AnalysisMaximize Theta by not allowing short sell Maximize Theta by allowing short sell Minimize Standard Deviation by not allowing short sell Minimize Standard Deviation by allowing short sell Minimize Standard Deviation by not allowing short sell for a given return Minimize Standard Deviation by allowing short sell for a given return

Maximize Theta by not allowing short sellExcess Portfolio Return Portfolio Variance Portfolio Standard Deviation eta Wi 0.043453 0.003896 0.06242 0.696147 1 0.102338 0.147688 0 0.09444 0.175407 0 0 0.159898 0.151164 0.169066

Excel

BOC BANGLADESH EAS ERN HOUSING LIMI ED APEX ANNERY LIMI ED FAREAS ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUS RIES LIMI ED A LAS BANGLADESH LIMI ED. USMANIA GLASS SHEE FAC ORY LIMI ED CONFIDENCE CEMEN NA IONAL BANK LIMI ED. IDLC FINANCE LIMI ED

Maximize Theta by allowing short sellExcess Portfolio Return Portfolio Variance Portfolio Standard Deviation Theta Wi 0.06047002 0.0052386 0.0723782 0.835 728 1 0.09273903 0.20832873 0.35270042 0.27579077 -0.6152877 0.23281132 0.09287 0.16872236 0.09273903 0.20832873

Excel

BOC BANGLADESH EAS ERN HOUSING LIMI ED APEX ANNERY LIMI ED FAREAS ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUS RIES LIMI ED A LAS BANGLADESH LIMI ED. USMANIA GLASS SHEE FAC ORY LIMI ED CONFIDENCE CEMEN NA IONAL BANK LIMI ED. IDLC FINANCE LIMI ED

Minimize Standard Deviation by not allowing short sellExcess Portfolio Return Portfolio Variance Portfolio Standard Deviation T eta Wi 0.0372811 0.00335171 0.05789396 0.6 39550 1 0 0.08485926 0.1969475 0.00765627 0 0.04860027 0.19956799 0.06500745 0 0.08485926

Excel

BOC BANGLADESH EAS ERN HOUSING LIMI ED APEX ANNERY LIMI ED FAREAS ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUS RIES LIMI ED A LAS BANGLADESH LIMI ED. USMANIA GLASS SHEE FAC ORY LIMI ED CONFIDENCE CEMEN NA IONAL BANK LIMI ED. IDLC FINANCE LIMI ED

Minimize Standard Deviation by allowing short sellExcess Portfolio Return Portfolio Variance Portfolio Standard Deviation Thet Wi 0.03856169 0.0033409 0.0578005 0.

Excel

BOC BANGLADESH EAS ERN HOUSING LIMI ED APEX ANNERY LIMI ED FAREAS ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUS RIES LIMI ED A LAS BANGLADESH LIMI ED. USMANIA GLASS SHEE FAC ORY LIMI ED CONFIDENCE CEMEN NA IONAL BANK LIMI ED. IDLC FINANCE LIMI ED

0.26442842 0.12036211 0.00168979 0.09335546 0.20955164 0.04539863 -0.0508771 0.05390185 0.19401444 0.06817478

Minimize Standard Deviation by not allowing short sell for a given returnPortfolio et r Excess Portfolio et r Portfolio Varia ce Portfolio Sta dard Deviation Theta Wi Given et rn BOC BANGLADESH EASTE N HOUSING LIMITED APEX TANNE Y LIMITED FA EAST ISLAMI LIFE INSU ANCE CO. ADVANCED CHEMICAL INDUST IES LIMITED ATLAS BANGLADESH LIMITED. USMANIA GLASS SHEET FACTO Y LIMITED CONFIDENCE CEMENT NATIONAL BANK LIMITED. IDLC FINANCE LIMITED 0.047467 0.155755 0 0.097288 0.168222 0 0 0.193904 0.136123 0.201241 . 5 . 45325 . 428365 0.06544956 0.69251799 1 0.05

Excel

Minimize Standard Deviation by allowing short sell for a given returnPortfolio Return Excess Portfolio Return Portfolio Variance Portfolio Standard Deviation Theta Wi Given Return BOC BANGLADESH EASTERN HOUSING LIMITED APEX TANNERY LIMITED FAREAST ISLAMI LIFE INSURANCE CO. ADVANCED CHEMICAL INDUSTRIES LIMITED ATLAS BANGLADESH LIMITED. USMANIA GLASS SHEET FACTORY LIMITED CONFIDENCE CEMENT NATIONAL BANK LIMITED. IDLC FINANCE LIMITED 0.190627 0.134208 0.029815 0.129024 0.253927 0.116481 -0.22507 0.109164 0.162566 0.099256 0.05 0.045325 0.00352165 0.05934348 0.76377383 1 0.05

Excel

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