Date

3-Jan-12
1-Dec-11
1-Nov-11
3-Oct-11
1-Sep-11
1-Aug-11
1-Jul-11
1-Jun-11
2-May-11
1-Apr-11
1-Mar-11
1-Feb-11
3-Jan-11
1-Dec-10
1-Nov-10
1-Oct-10
1-Sep-10
2-Aug-10
1-Jul-10
1-Jun-10
3-May-10
1-Apr-10
1-Mar-10
1-Feb-10
4-Jan-10
1-Dec-09
2-Nov-09
1-Oct-09
1-Sep-09
3-Aug-09
1-Jul-09
1-Jun-09
1-May-09
1-Apr-09
2-Mar-09
2-Feb-09
2-Jan-09
1-Dec-08
3-Nov-08
1-Oct-08
2-Sep-08
1-Aug-08
1-Jul-08

Adjusted close price

Coca Cola Disney
General Electric
3M (MMM)Johnson and
IBM
Johnson DFT
MSFT
32.84
38.31
18.08
83.92
63.56
188.62
24.88
28.72
34.03
36.93
17.31
79.1
63.24
180.08
23.63
25.25
32.7
34.72
15.23
78.43
62.41
184.11
21.87
24.88
32.99
33.79
16
75.94
61.52
180.09
20.18
25.7
32.62
29.21
14.57
68.99
60.85
170.57
19.01
24.02
33.78
32.99
15.47
79.74
62.87
167.68
22.35
25.68
32.61
37.41
16.98
83.18
61.36
176.61
24.6
26.28
32.27
37.81
17.88
90.54
63
166.6
24.32
24.94
31.81
40.32
18.47
90.09
63.72
164.06
25.11
23.99
32.12
41.75
19.23
92.25
61.7
164.92
23.5
24.7
31.59
41.74
18.86
88.73
55.63
157.66
23.29
24.19
30.21
42.37
19.67
87.52
57.68
156.51
23.34
25.33
29.71
37.65
18.81
82.93
55.61
156.01
21.91
26.27
31.09
36.33
17.08
81.41
57.55
141.34
20.33
26.44
29.86
34.98
14.67
79.22
57.27
136.23
21.47
23.93
28.79
34.62
14.85
78.95
58.8
137.68
23.85
25.11
27.47
31.71
15.06
81.28
57.16
128.61
23.9
23.06
26.03
31.18
13.32
73.63
52.6
118.05
23.37
22.1
25.68
32.28
14.83
79.69
53.09
122.5
23.87
24.17
23.35
30.18
13.26
73.58
53.97
117.81
23.23
21.55
23.75
32.02
14.95
73.88
53.28
119.5
24.04
24.16
24.69
35.3
17.24
82.09
58.23
122.44
20.87
28.47
25.41
33.45
16.64
77.36
59.05
121.73
20.32
27.31
24.16
29.93
14.68
74.2
57.05
120.7
18.38
26.73
24.86
28.31
14.61
74.03
56.5
115.65
15.58
26.15
26.12
30.9
13.74
76.03
57.89
123.69
16.87
28.29
26.21
28.62
14.46
71.22
56.48
119.4
14.96
27.29
24.26
25.93
12.87
67.22
52.65
113.46
14.08
25.62
24.43
26.01
14.82
67.43
54.3
112.52
12.44
23.76
22.01
24.67
12.47
65.88
53.89
111.05
12.21
22.77
22.49
23.79
12.02
63.97
53.86
110.43
9.99
21.61
21.66
22.1
10.52
54.52
50.24
97.78
8.79
21.84
22
22.94
12
51.8
48.79
99.52
8.84
19.19
19.27
20.74
11.26
51.8
45.91
96.14
7.93
18.5
19.67
17.2
9
44.71
46.12
90.25
6.42
16.77
18.09
15.88
7.57
40.88
43.84
85.73
4.97
14.74
18.92
19.59
10.49
47.85
50.16
84.91
3.48
15.51
20.05
21.49
14.01
51.19
52.03
77.97
1.93
17.63
20.75
21.02
14.56
59.54
50.94
75.6
2
18.33
19.35
24.18
16.55
56.74
52.9
85.65
5.82
20.11
23.22
28.64
21.63
60.28
59.75
107.76
14.24
24.04
22.7
30.19
23.52
63.18
60.74
112.15
16.18
24.58
22.45
28.32
23.68
61.68
58.67
117.45
15.07
23.07

2-Jun-08
1-May-08
1-Apr-08
3-Mar-08
1-Feb-08
2-Jan-08
3-Dec-07
1-Nov-07
1-Oct-07
4-Sep-07
1-Aug-07
2-Jul-07
1-Jun-07
1-May-07
2-Apr-07
1-Mar-07
1-Feb-07
3-Jan-07

22.66
24.8
25.5
26.36
25.16
25.39
26.41
26.73
26.44
24.6
22.88
22.17
22.25
22.39
22.06
20.28
19.59
20.09

29.12
31.36
30.26
29.28
30.25
27.85
30.12
30.61
31.97
31.75
31.02
30.47
31.52
32.27
31.85
31.35
31.18
32.02

22.34
25.43
27.07
30.64
27.43
29.01
30.41
31.14
33.48
33.67
31.4
31.31
30.93
30.14
29.57
28.36
28
28.69

60.98
67.96
66.95
68.91
68.26
68.91
72.95
72.03
74.28
80.49
78.26
76.06
74.24
75.24
70.41
65.02
63.02
62.81

55.13
57.18
57.08
55.19
52.72
53.37
56.38
57.26
54.74
55.19
51.9
50.48
51.41
52.79
53.24
49.95
52.17
55.05

108.78
118.78
110.32
105.24
104.07
97.53
98.43
95.77
105.36
106.88
105.87
100.04
95.16
96.38
92.05
84.89
83.7
89.03

17.18
18.46
16.42
15.04
15.16
15.54
17.68
16.79
19.24
60.01
60.65
58.26
59.62
57.89
56.1
56.55
54.46
53.77

24.68
25.4
25.49
25.37
24.31
29.02
31.69
29.91
32.66
26.14
25.49
25.64
26.06
27.14
26.39
24.57
24.83
27.11

PG
60.97
64.01
61.96
61.4
60.14
60.61
58.53
60.01
63.25
61.27
57.68
59.03
59.11
59.79
56.76
59.08
55.31
55.04
56.41
54.89
55.91
56.89
57.46
57.47
55.9
54.67
56.22
52.3
51.83
48.42
49.67
45.37
46.11
43.89
41.45
42.4
47.97
54.03
56.25
56.41
60.53
60.6
56.87

Simple return
WMT
Coca Cola Disney
General Electric
3M (MMM)Johnson and
IBM
Johnson DFT
59.88
-3.50%
3.74%
4.45%
6.09%
0.51%
4.74%
5.29%
58.32
4.07%
6.37%
13.66%
0.85%
1.33%
-2.19%
8.05%
57.13
-0.88%
2.75%
-4.81%
3.28%
1.45%
2.23%
8.37%
55.01
1.13%
15.68%
9.81%
10.07%
1.10%
5.58%
6.15%
50.34
-3.43% -11.46%
-5.82% -13.48%
-3.21%
1.72% -14.94%
51.59
3.59% -11.82%
-8.89%
-4.14%
2.46%
-5.06%
-9.15%
50.75
1.05%
-1.06%
-5.03%
-8.13%
-2.60%
6.01%
1.15%
51.17
1.45%
-6.23%
-3.19%
0.50%
-1.13%
1.55%
-3.15%
53.17
-0.97%
-3.43%
-3.95%
-2.34%
3.27%
-0.52%
6.85%
52.59
1.68%
0.02%
1.96%
3.97%
10.91%
4.60%
0.90%
49.79
4.57%
-1.49%
-4.12%
1.38%
-3.55%
0.73%
-0.21%
49.38
1.68%
12.54%
4.57%
5.53%
3.72%
0.32%
6.53%
53.26
-4.44%
3.63%
10.13%
1.87%
-3.37%
10.38%
7.77%
51.23
4.12%
3.86%
16.43%
2.76%
0.49%
3.75%
-5.31%
51.1
3.72%
1.04%
-1.21%
0.34%
-2.60%
-1.05%
-9.98%
51.17
4.81%
9.18%
-1.39%
-2.87%
2.87%
7.05%
-0.21%
50.56
5.53%
1.70%
13.06%
10.39%
8.67%
8.95%
2.27%
47.37
1.36%
-3.41% -10.18%
-7.60%
-0.92%
-3.63%
-2.09%
48.08
9.98%
6.96%
11.84%
8.30%
-1.63%
3.98%
2.76%
45.15
-1.68%
-5.75% -11.30%
-0.41%
1.30%
-1.41%
-3.37%
47.49
-3.81%
-9.29% -13.28% -10.00%
-8.50%
-2.40%
15.19%
50.09
-2.83%
5.53%
3.61%
6.11%
-1.39%
0.58%
2.71%
51.92
5.17%
11.76%
13.35%
4.26%
3.51%
0.85%
10.55%
50.21
-2.82%
5.72%
0.48%
0.23%
0.97%
4.37%
17.97%
49.61
-4.82%
-8.38%
6.33%
-2.63%
-2.40%
-6.50%
-7.65%
49.63
-0.34%
7.97%
-4.98%
6.75%
2.50%
3.59%
12.77%
50.4
8.04%
10.37%
12.35%
5.95%
7.27%
5.24%
6.25%
45.9
-0.70%
-0.31% -13.16%
-0.31%
-3.04%
0.84%
13.18%
45.35
11.00%
5.43%
18.85%
2.35%
0.76%
1.32%
1.88%
47
-2.13%
3.70%
3.74%
2.99%
0.06%
0.56%
22.22%
45.83
3.83%
7.65%
14.26%
17.33%
7.21%
12.94%
13.65%
44.51
-1.55%
-3.66% -12.33%
5.25%
2.97%
-1.75%
-0.57%
45.7
14.17%
10.61%
6.57%
0.00%
6.27%
3.52%
11.48%
46.06
-2.03%
20.58%
25.11%
15.86%
-0.46%
6.53%
23.52%
47.62
8.73%
8.31%
18.89%
9.37%
5.20%
5.27%
29.18%
44.75
-4.39% -18.94% -27.84% -14.57% -12.60%
0.97%
42.82%
42.82
-5.64%
-8.84% -25.12%
-6.52%
-3.59%
8.90%
80.31%
50.95
-3.37%
2.24%
-3.78% -14.02%
2.14%
3.13%
-3.50%
50.57
7.24% -13.07% -12.02%
4.93%
-3.71% -11.73% -65.64%
50.5 -16.67% -15.57% -23.49%
-5.87% -11.46% -20.52% -59.13%
54.19
2.29%
-5.13%
-8.04%
-4.59%
-1.63%
-3.91% -11.99%
53.45
1.11%
6.60%
-0.68%
2.43%
3.53%
-4.51%
7.37%
52.83
-0.93%
-2.75%
6.00%
1.15%
6.42%
7.97% -12.28%

52.49
57.01
57.87
60.13
56.79
56.14
62.69
63.19
59.36
59.76
55.49
52.56
51.7
53.69
54.41
53.07
53.35
54.51

50.65
52.04
52.04
47.28
44.29
45.32
42.45
42.59
40.2
38.81
38.8
40.65
42.56
42.11
42.2
41.35
42.34
41.8

-8.63%
-2.75%
-3.26%
4.77%
-0.91%
-3.86%
-1.20%
1.10%
7.48%
7.52%
3.20%
-0.36%
-0.63%
1.50%
8.78%
3.52%
-2.49%
0.95%

-7.14%
3.64%
3.35%
-3.21%
8.62%
-7.54%
-1.60%
-4.25%
0.69%
2.35%
1.81%
-3.33%
-2.32%
1.32%
1.59%
0.55%
-2.62%
0.59%

-12.15%
-6.06%
-11.65%
11.70%
-5.45%
-4.60%
-2.34%
-6.99%
-0.56%
7.23%
0.29%
1.23%
2.62%
1.93%
4.27%
1.29%
-2.41%
-0.18%

-10.27%
1.51%
-2.84%
0.95%
-0.94%
-5.54%
1.28%
-3.03%
-7.72%
2.85%
2.89%
2.45%
-1.33%
6.86%
8.29%
3.17%
0.33%
0.70%

-3.59%
0.18%
3.42%
4.69%
-1.22%
-5.34%
-1.54%
4.60%
-0.82%
6.34%
2.81%
-1.81%
-2.61%
-0.85%
6.59%
-4.26%
-5.23%
0.34%

-8.42%
7.67%
4.83%
1.12%
6.71%
-0.91%
2.78%
-9.10%
-1.42%
0.95%
5.83%
5.13%
-1.27%
4.70%
8.43%
1.42%
-5.99%
1.42%

-6.93%
12.42%
9.18%
-0.79%
-2.45%
-12.10%
5.30%
-12.73%
-67.94%
-1.06%
4.10%
-2.28%
2.99%
3.19%
-0.80%
3.84%
1.28%
1.55%

MSFT
PG
WMT
13.74%
-4.75%
2.67%
1.49%
3.31%
2.08%
-3.19%
0.91%
3.85%
6.99%
2.10%
9.28%
-6.46%
-0.78%
-2.42%
-2.28%
3.55%
1.66%
5.37%
-2.47%
-0.82%
3.96%
-5.12%
-3.76%
-2.87%
3.23%
1.10%
2.11%
6.22%
5.62%
-4.50%
-2.29%
0.83%
-3.58%
-0.14%
-7.29%
-0.64%
-1.14%
3.96%
10.49%
5.34%
0.25%
-4.70%
-3.93%
-0.14%
8.89%
6.82%
1.21%
4.34%
0.49%
6.73%
-8.56%
-2.43%
-1.48%
12.16%
2.77%
6.49%
-10.80%
-1.82%
-4.93%
-15.14%
-1.72%
-5.19%
4.25%
-0.99%
-3.52%
2.17%
-0.02%
3.41%
2.22%
2.81%
1.21%
-7.56%
2.25%
-0.04%
3.66%
-2.76%
-1.53%
6.52%
7.50%
9.80%
7.83%
0.91%
1.21%
4.35%
7.04%
-3.51%
5.37%
-2.52%
2.55%
-1.05%
9.48%
2.97%
13.81%
-1.60%
-2.60%
3.73%
5.06%
-0.78%
10.32%
5.89%
-3.28%
13.77%
-2.24%
6.41%
-4.96% -11.61%
4.51%
-12.02% -11.22% -15.96%
-3.82%
-3.95%
0.75%
-8.85%
-0.28%
0.14%
-16.35%
-6.81%
-6.81%
-2.20%
-0.12%
1.38%
6.55%
6.56%
1.17%
-6.52%
8.34%
4.30%

Mean
Coca Cola
Disney
General Electric
3M (MMM)
Johnson and Johnson
IBM
DFT
MSFT
PG
WMT

vcv matrix
Coca Cola
Disney
General Electric
3M (MMM)
Johnson and Johnson
IBM
DFT
MSFT
PG
WMT

0.95%
0.59%
-0.18%
0.70%
0.34%
1.42%
1.55%
0.41%
0.30%
0.70%

P1
Coca Cola
-0.14934
Disney
-0.1937
General Electric
-0.0572
3M (MMM)
0.063277
Johnson and Johnson 0.418131
IBM
-0.13772
DFT
0.060665
MSFT
0.204337
PG
0.525323
WMT
0.266219
Total weight
1
return
0.002682
standard deviation
0.038909
variance
0.15%
Risk-free rate
Theta

0.001
0.399

Super Portfolio of P1 and RFA

Weight of RFA
0
Expected return
0.015868
Variance
0.001389
St. Deviation
0.037263

P2
-0.00208
-0.0979
-0.14189
0.111637
0.232387
0.020108
0.03793
0.113706
0.428285
0.297811
1
0.005957
0.032049
0.10%

-2.83%
-0.35%
0.47%
4.36%
-16.23%
-8.43%
5.95%
-8.42%
24.94%
2.55%
-0.59%
-1.61%
-3.98%
2.84%
7.41%
-1.05%
-8.41%
0.41%

-7.93%
-1.49%
-3.76%
5.88%
1.16%
-10.45%
-0.79%
6.45%
-0.67%
7.70%
5.57%
1.66%
-3.71%
-1.32%
2.52%
-0.52%
-2.13%
0.30%

-2.67%
0.00%
10.07%
6.75%
-2.27%
6.76%
-0.33%
5.95%
3.58%
0.03%
-4.55%
-4.49%
1.07%
-0.21%
2.06%
-2.34%
1.29%
0.70%

0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Coca Cola
0.002618
0.001672
0.003092
0.001402
0.001269
0.000891
-0.00048
0.002063
0.001316
0.000734

Disney
0.001672
0.005806
0.005888
0.003206
0.001826
0.0023
0.004233
0.003088
0.001759
0.000776

General Electric
3M (MMM)Johnson andIBM
Johnson
0.003092 0.001402 0.001269 0.000891
0.005888 0.003206 0.001826
0.0023
0.011543 0.004679 0.002604 0.002603
0.004679 0.004234 0.001497 0.001446
0.002604 0.001497 0.002037 0.001114
0.002603 0.001446 0.001114 0.003224
0.001394 0.001818 0.000874 0.006547
0.004326 0.002116 0.001417 0.001558
0.003199 0.00153 0.001449 0.000665
0.001724 0.000597 0.000754 0.000414
Optimal risky portfolio
Weight of P1
expected return of portfolio
covariance
variance
standard deviation

P1
Coca Cola
0.443549
Disney
0.191986
General Electric
-0.39815
3M (MMM)
0.257949
Johnson and Johnson -0.32971
IBM
0.497718
DFT
-0.03087
MSFT
-0.16055
PG
0.134663
WMT
0.393418
sum
1.000001
return
0.015868
standard deviation 0.037263
variance
0.001389

0
0.005957
0.001195
0.001027
0.032049

DFT
-0.00048
0.004233
0.001394
0.001818
0.000874
0.006547
0.04364
0.000281
-0.0011
-0.00121

MSFT
0.002063
0.003088
0.004326
0.002116
0.001417
0.001558
0.000281
0.006133
0.001194
0.001246

PG
0.001316
0.001759
0.003199
0.00153
0.001449
0.000665
-0.0011
0.001194
0.00226
0.000585

-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4

St. Deviation
3.20%
3.03%
3.11%
3.20%
3.32%
3.44%
3.58%
3.73%
3.89%
4.06%
4.23%

-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4

St. Deviation
3.73%
5.22%
4.47%
3.73%
2.98%
2.24%
1.49%
0.75%
0.00%
0.75%
1.49%

2.50%

2.00%

1.50%
Series1

1.00%

0.50%

2.50%

3.00%

3.50%

4.00%

4.50%

0.00%
0.00%

1.00%

2.00%

3.00%

WMT
0.000734
0.000776
0.001724
0.000597
0.000754
0.000414
-0.00121
0.001246
0.000585
0.00205

Exp. Return
0.60%
0.73%
0.66%
0.60%
0.53%
0.46%
0.40%
0.33%
0.27%
0.20%
0.14%

Exp. Return
1.59%
2.18%
1.88%
1.59%
1.29%
0.99%
0.69%
0.40%
0.10%
-0.20%
-0.49%

Series1

3.00%

4.00%

5.00%

6.00%

Date

3-Jan-12
1-Dec-11
1-Nov-11
3-Oct-11
1-Sep-11
1-Aug-11
1-Jul-11
1-Jun-11
2-May-11
1-Apr-11
1-Mar-11
1-Feb-11
3-Jan-11
1-Dec-10
1-Nov-10
1-Oct-10
1-Sep-10
2-Aug-10
1-Jul-10
1-Jun-10
3-May-10
1-Apr-10
1-Mar-10
1-Feb-10
4-Jan-10
1-Dec-09
2-Nov-09
1-Oct-09
1-Sep-09
3-Aug-09
1-Jul-09
1-Jun-09
1-May-09
1-Apr-09
2-Mar-09
2-Feb-09
2-Jan-09
1-Dec-08
3-Nov-08
1-Oct-08
2-Sep-08
1-Aug-08
1-Jul-08
2-Jun-08
1-May-08

Adjusted close price

Coca Cola Disney
General Electric
3M (MMM)Johnson and
IBM
Johnson DFT
MSFT
32.84
38.31
18.08
83.92
63.56
188.62
24.88
28.72
34.03
36.93
17.31
79.1
63.24
180.08
23.63
25.25
32.7
34.72
15.23
78.43
62.41
184.11
21.87
24.88
32.99
33.79
16
75.94
61.52
180.09
20.18
25.7
32.62
29.21
14.57
68.99
60.85
170.57
19.01
24.02
33.78
32.99
15.47
79.74
62.87
167.68
22.35
25.68
32.61
37.41
16.98
83.18
61.36
176.61
24.6
26.28
32.27
37.81
17.88
90.54
63
166.6
24.32
24.94
31.81
40.32
18.47
90.09
63.72
164.06
25.11
23.99
32.12
41.75
19.23
92.25
61.7
164.92
23.5
24.7
31.59
41.74
18.86
88.73
55.63
157.66
23.29
24.19
30.21
42.37
19.67
87.52
57.68
156.51
23.34
25.33
29.71
37.65
18.81
82.93
55.61
156.01
21.91
26.27
31.09
36.33
17.08
81.41
57.55
141.34
20.33
26.44
29.86
34.98
14.67
79.22
57.27
136.23
21.47
23.93
28.79
34.62
14.85
78.95
58.8
137.68
23.85
25.11
27.47
31.71
15.06
81.28
57.16
128.61
23.9
23.06
26.03
31.18
13.32
73.63
52.6
118.05
23.37
22.1
25.68
32.28
14.83
79.69
53.09
122.5
23.87
24.17
23.35
30.18
13.26
73.58
53.97
117.81
23.23
21.55
23.75
32.02
14.95
73.88
53.28
119.5
24.04
24.16
24.69
35.3
17.24
82.09
58.23
122.44
20.87
28.47
25.41
33.45
16.64
77.36
59.05
121.73
20.32
27.31
24.16
29.93
14.68
74.2
57.05
120.7
18.38
26.73
24.86
28.31
14.61
74.03
56.5
115.65
15.58
26.15
26.12
30.9
13.74
76.03
57.89
123.69
16.87
28.29
26.21
28.62
14.46
71.22
56.48
119.4
14.96
27.29
24.26
25.93
12.87
67.22
52.65
113.46
14.08
25.62
24.43
26.01
14.82
67.43
54.3
112.52
12.44
23.76
22.01
24.67
12.47
65.88
53.89
111.05
12.21
22.77
22.49
23.79
12.02
63.97
53.86
110.43
9.99
21.61
21.66
22.1
10.52
54.52
50.24
97.78
8.79
21.84
22
22.94
12
51.8
48.79
99.52
8.84
19.19
19.27
20.74
11.26
51.8
45.91
96.14
7.93
18.5
19.67
17.2
9
44.71
46.12
90.25
6.42
16.77
18.09
15.88
7.57
40.88
43.84
85.73
4.97
14.74
18.92
19.59
10.49
47.85
50.16
84.91
3.48
15.51
20.05
21.49
14.01
51.19
52.03
77.97
1.93
17.63
20.75
21.02
14.56
59.54
50.94
75.6
2
18.33
19.35
24.18
16.55
56.74
52.9
85.65
5.82
20.11
23.22
28.64
21.63
60.28
59.75
107.76
14.24
24.04
22.7
30.19
23.52
63.18
60.74
112.15
16.18
24.58
22.45
28.32
23.68
61.68
58.67
117.45
15.07
23.07
22.66
29.12
22.34
60.98
55.13
108.78
17.18
24.68
24.8
31.36
25.43
67.96
57.18
118.78
18.46
25.4

1-Apr-08
3-Mar-08
1-Feb-08
2-Jan-08
3-Dec-07
1-Nov-07
1-Oct-07
4-Sep-07
1-Aug-07
2-Jul-07
1-Jun-07
1-May-07
2-Apr-07
1-Mar-07
1-Feb-07
3-Jan-07

25.5
26.36
25.16
25.39
26.41
26.73
26.44
24.6
22.88
22.17
22.25
22.39
22.06
20.28
19.59
20.09

30.26
29.28
30.25
27.85
30.12
30.61
31.97
31.75
31.02
30.47
31.52
32.27
31.85
31.35
31.18
32.02

27.07
30.64
27.43
29.01
30.41
31.14
33.48
33.67
31.4
31.31
30.93
30.14
29.57
28.36
28
28.69

66.95
68.91
68.26
68.91
72.95
72.03
74.28
80.49
78.26
76.06
74.24
75.24
70.41
65.02
63.02
62.81

57.08
55.19
52.72
53.37
56.38
57.26
54.74
55.19
51.9
50.48
51.41
52.79
53.24
49.95
52.17
55.05

110.32
105.24
104.07
97.53
98.43
95.77
105.36
106.88
105.87
100.04
95.16
96.38
92.05
84.89
83.7
89.03

16.42
15.04
15.16
15.54
17.68
16.79
19.24
60.01
60.65
58.26
59.62
57.89
56.1
56.55
54.46
53.77

25.49
25.37
24.31
29.02
31.69
29.91
32.66
26.14
25.49
25.64
26.06
27.14
26.39
24.57
24.83
27.11

PG
60.97
64.01
61.96
61.4
60.14
60.61
58.53
60.01
63.25
61.27
57.68
59.03
59.11
59.79
56.76
59.08
55.31
55.04
56.41
54.89
55.91
56.89
57.46
57.47
55.9
54.67
56.22
52.3
51.83
48.42
49.67
45.37
46.11
43.89
41.45
42.4
47.97
54.03
56.25
56.41
60.53
60.6
56.87
52.49
57.01

Simple return
WMT
DJW
Coca Cola Disney
General Electric
3M (MMM)Johnson and
IBM
Johnson
59.88
12,632.91
-3.50%
3.74%
4.45%
6.09%
0.51%
4.74%
12,217.56
58.32
4.07%
6.37%
13.66%
0.85%
1.33%
-2.19%
12,045.68
57.13
-0.88%
2.75%
-4.81%
3.28%
1.45%
2.23%
11,955.01
55.01
1.13%
15.68%
9.81%
10.07%
1.10%
5.58%
10,913.38
50.34
-3.43% -11.46%
-5.82% -13.48%
-3.21%
1.72%
11,613.53
51.59
3.59% -11.82%
-8.89%
-4.14%
2.46%
-5.06%
12,143.24
50.75
1.05%
-1.06%
-5.03%
-8.13%
-2.60%
6.01%
12,414.34
51.17
1.45%
-6.23%
-3.19%
0.50%
-1.13%
1.55%
12,569.79
53.17
-0.97%
-3.43%
-3.95%
-2.34%
3.27%
-0.52%
12,810.54
52.59
1.68%
0.02%
1.96%
3.97%
10.91%
4.60%
12,319.73
49.79
4.57%
-1.49%
-4.12%
1.38%
-3.55%
0.73%
12,226.34
49.38
1.68%
12.54%
4.57%
5.53%
3.72%
0.32%
11,891.93
53.26
-4.44%
3.63%
10.13%
1.87%
-3.37%
10.38%
11,577.51
51.23
4.12%
3.86%
16.43%
2.76%
0.49%
3.75%
11,006.02
51.1
3.72%
1.04%
-1.21%
0.34%
-2.60%
-1.05%
11,118.49
51.17
4.81%
9.18%
-1.39%
-2.87%
2.87%
7.05%
10,788.05
50.56
5.53%
1.70%
13.06%
10.39%
8.67%
8.95%
10,014.72
47.37
1.36%
-3.41% -10.18%
-7.60%
-0.92%
-3.63%
10,465.94
48.08
9.98%
6.96%
11.84%
8.30%
-1.63%
3.98%
9,774.02
45.15
-1.68%
-5.75% -11.30%
-0.41%
1.30%
-1.41%
10,136.63
47.49
-3.81%
-9.29% -13.28% -10.00%
-8.50%
-2.40%
11,008.61
50.09
-2.83%
5.53%
3.61%
6.11%
-1.39%
0.58%
10,856.63
51.92
5.17%
11.76%
13.35%
4.26%
3.51%
0.85%
10,325.26
50.21
-2.82%
5.72%
0.48%
0.23%
0.97%
4.37%
10,067.33
49.61
-4.82%
-8.38%
6.33%
-2.63%
-2.40%
-6.50%
10,428.05
49.63
-0.34%
7.97%
-4.98%
6.75%
2.50%
3.59%
10,344.84
50.4
8.04%
10.37%
12.35%
5.95%
7.27%
5.24%
9,712.73
45.9
-0.70%
-0.31% -13.16%
-0.31%
-3.04%
0.84%
9,712.28
45.35
11.00%
5.43%
18.85%
2.35%
0.76%
1.32%
9,496.28
47
-2.13%
3.70%
3.74%
2.99%
0.06%
0.56%
9,171.61
45.83
3.83%
7.65%
14.26%
17.33%
7.21%
12.94%
8,447.00
44.51
-1.55%
-3.66% -12.33%
5.25%
2.97%
-1.75%
8,500.33
45.7
14.17%
10.61%
6.57%
0.00%
6.27%
3.52%
8,168.12
46.06
-2.03%
20.58%
25.11%
15.86%
-0.46%
6.53%
7,608.92
47.62
8.73%
8.31%
18.89%
9.37%
5.20%
5.27%
7,062.93
44.75
-4.39% -18.94% -27.84% -14.57% -12.60%
0.97%
8,000.86
42.82
-5.64%
-8.84% -25.12%
-6.52%
-3.59%
8.90%
8,776.39
50.95
-3.37%
2.24%
-3.78% -14.02%
2.14%
3.13%
8,829.04
50.57
7.24% -13.07% -12.02%
4.93%
-3.71% -11.73%
9,325.01
50.5
-16.67% -15.57% -23.49%
-5.87% -11.46% -20.52%
10,850.66
54.19
2.29%
-5.13%
-8.04%
-4.59%
-1.63%
-3.91%
11,543.96
53.45
1.11%
6.60%
-0.68%
2.43%
3.53%
-4.51%
11,378.02
52.83
-0.93%
-2.75%
6.00%
1.15%
6.42%
7.97%
11,350.01
50.65
-8.63%
-7.14% -12.15% -10.27%
-3.59%
-8.42%
12,638.32
52.04
-2.75%
3.64%
-6.06%
1.51%
0.18%
7.67%

57.87
60.13
56.79
56.14
62.69
63.19
59.36
59.76
55.49
52.56
51.7
53.69
54.41
53.07
53.35
54.51

52.04
47.28
44.29
45.32
42.45
42.59
40.2
38.81
38.8
40.65
42.56
42.11
42.2
41.35
42.34
41.8

12,820.13
12,262.89
12,266.39
12,650.36
13,264.82
13,371.72
13,930.01
13,895.63
13,357.74
13,211.99
13,408.62
13,627.64
13,062.91
12,354.35
12,268.63
12,621.69

-3.26%
4.77%
-0.91%
-3.86%
-1.20%
1.10%
7.48%
7.52%
3.20%
-0.36%
-0.63%
1.50%
8.78%
3.52%
-2.49%
1.03%

3.35%
-3.21%
8.62%
-7.54%
-1.60%
-4.25%
0.69%
2.35%
1.81%
-3.33%
-2.32%
1.32%
1.59%
0.55%
-2.62%
0.53%

-11.65%
11.70%
-5.45%
-4.60%
-2.34%
-6.99%
-0.56%
7.23%
0.29%
1.23%
2.62%
1.93%
4.27%
1.29%
-2.41%
-0.26%

-2.84%
0.95%
-0.94%
-5.54%
1.28%
-3.03%
-7.72%
2.85%
2.89%
2.45%
-1.33%
6.86%
8.29%
3.17%
0.33%
0.60%

3.42%
4.69%
-1.22%
-5.34%
-1.54%
4.60%
-0.82%
6.34%
2.81%
-1.81%
-2.61%
-0.85%
6.59%
-4.26%
-5.23%
0.34%

4.83%
1.12%
6.71%
-0.91%
2.78%
-9.10%
-1.42%
0.95%
5.83%
5.13%
-1.27%
4.70%
8.43%
1.42%
-5.99%
1.37%

return

Exc
DFT
5.29%
8.05%
8.37%
6.15%
-14.94%
-9.15%
1.15%
-3.15%
6.85%
0.90%
-0.21%
6.53%
7.77%
-5.31%
-9.98%
-0.21%
2.27%
-2.09%
2.76%
-3.37%
15.19%
2.71%
10.55%
17.97%
-7.65%
12.77%
6.25%
13.18%
1.88%
22.22%
13.65%
-0.57%
11.48%
23.52%
29.18%
42.82%
80.31%
-3.50%
-65.64%
-59.13%
-11.99%
7.37%
-12.28%
-6.93%
12.42%

MSFT
PG
WMT
DJW
Risk Free rateCoca Cola Disney
General Electric
13.74%
-4.75%
2.67%
3.40%
0.0001
-3.51%
3.73%
4.44%
1.49%
3.31%
2.08%
1.43%
0.0001
4.06%
6.36%
13.65%
-3.19%
0.91%
3.85%
0.76%
0.0001
-0.89%
2.74%
-4.82%
6.99%
2.10%
9.28%
9.54%
0.0001
1.13%
15.67%
9.81%
-6.46%
-0.78%
-2.42%
-6.03%
0.0001
-3.44% -11.47%
-5.83%
-2.28%
3.55%
1.66%
-4.36%
0.0001
3.58% -11.82%
-8.90%
5.37%
-2.47%
-0.82%
-2.18%
0.0001
1.05%
-1.07%
-5.04%
3.96%
-5.12%
-3.76%
-1.24%
0.0001
1.44%
-6.23%
-3.20%
-2.87%
3.23%
1.10%
-1.88%
0.0001
-0.97%
-3.43%
-3.96%
2.11%
6.22%
5.62%
3.98%
0.0001
1.67%
0.02%
1.95%
-4.50%
-2.29%
0.83%
0.76%
0.0001
4.56%
-1.50%
-4.13%
-3.58%
-0.14%
-7.29%
2.81%
0.0001
1.67%
12.53%
4.56%
-0.64%
-1.14%
3.96%
2.72%
0.0001
-4.45%
3.63%
10.12%
10.49%
5.34%
0.25%
5.19%
0.0001
4.11%
3.85%
16.42%
-4.70%
-3.93%
-0.14%
-1.01%
0.0001
3.71%
1.03%
-1.22%
8.89%
6.82%
1.21%
3.06%
0.0001
4.80%
9.17%
-1.40%
4.34%
0.49%
6.73%
7.72%
0.0001
5.52%
1.69%
13.05%
-8.56%
-2.43%
-1.48%
-4.31%
0.0001
1.35%
-3.42% -10.19%
12.16%
2.77%
6.49%
7.08%
0.0001
9.97%
6.95%
11.83%
-10.80%
-1.82%
-4.93%
-3.58%
0.0001
-1.69%
-5.75% -11.31%
-15.14%
-1.72%
-5.19%
-7.92%
0.0001
-3.82%
-9.30% -13.29%
4.25%
-0.99%
-3.52%
1.40%
0.0001
-2.84%
5.52%
3.60%
2.17%
-0.02%
3.41%
5.15%
0.0001
5.17%
11.75%
13.34%
2.22%
2.81%
1.21%
2.56%
0.0001
-2.82%
5.71%
0.47%
-7.56%
2.25%
-0.04%
-3.46%
0.0001
-4.83%
-8.39%
6.32%
3.66%
-2.76%
-1.53%
0.80%
0.0001
-0.35%
7.96%
-4.99%
6.52%
7.50%
9.80%
6.51%
0.0001
8.03%
10.37%
12.35%
7.83%
0.91%
1.21%
0.00%
0.0001
-0.70%
-0.32% -13.17%
4.35%
7.04%
-3.51%
2.27%
0.0001
10.99%
5.42%
18.84%
5.37%
-2.52%
2.55%
3.54%
0.0001
-2.14%
3.69%
3.74%
-1.05%
9.48%
2.97%
8.58%
0.0001
3.82%
7.64%
14.25%
13.81%
-1.60%
-2.60%
-0.63%
0.0001
-1.55%
-3.67% -12.34%
3.73%
5.06%
-0.78%
4.07%
0.0001
14.16%
10.60%
6.56%
10.32%
5.89%
-3.28%
7.35%
0.0001
-2.04%
20.57%
25.10%
13.77%
-2.24%
6.41%
7.73%
0.0001
8.73%
8.30%
18.88%
-4.96% -11.61%
4.51% -11.72%
0.0001
-4.40% -18.95% -27.84%
-12.02% -11.22% -15.96%
-8.84%
0.0001
-5.64%
-8.85% -25.13%
-3.82%
-3.95%
0.75%
-0.60%
0.0001
-3.38%
2.23%
-3.79%
-8.85%
-0.28%
0.14%
-5.32%
0.0001
7.23% -13.08% -12.03%
-16.35%
-6.81%
-6.81% -14.06%
0.0001
-16.68% -15.58% -23.49%
-2.20%
-0.12%
1.38%
-6.01%
0.0001
2.28%
-5.14%
-8.04%
6.55%
6.56%
1.17%
1.46%
0.0001
1.11%
6.59%
-0.68%
-6.52%
8.34%
4.30%
0.25%
0.0001
-0.94%
-2.76%
5.99%
-2.83%
-7.93%
-2.67% -10.19%
0.0001
-8.64%
-7.15% -12.16%
-0.35%
-1.49%
0.00%
-1.42%
0.0001
-2.75%
3.63%
-6.07%

9.18%
-0.79%
-2.45%
-12.10%
5.30%
-12.73%
-67.94%
-1.06%
4.10%
-2.28%
2.99%
3.19%
-0.80%
3.84%
1.28%
1.49%

0.47%
4.36%
-16.23%
-8.43%
5.95%
-8.42%
24.94%
2.55%
-0.59%
-1.61%
-3.98%
2.84%
7.41%
-1.05%
-8.41%
0.18%

-3.76%
5.88%
1.16%
-10.45%
-0.79%
6.45%
-0.67%
7.70%
5.57%
1.66%
-3.71%
-1.32%
2.52%
-0.52%
-2.13%
0.39%

10.07%
6.75%
-2.27%
6.76%
-0.33%
5.95%
3.58%
0.03%
-4.55%
-4.49%
1.07%
-0.21%
2.06%
-2.34%
1.29%
0.67%

4.54%
0.0001
-3.27%
-0.03%
0.0001
4.76%
-3.04%
0.0001
-0.91%
-4.63%
0.0001
-3.87%
-0.80%
0.0001
-1.21%
-4.01%
0.0001
1.09%
0.25%
0.0001
7.47%
4.03%
0.0001
7.51%
1.10%
0.0001
3.19%
-1.47%
0.0001
-0.37%
-1.61%
0.0001
-0.63%
4.32%
0.0001
1.49%
5.74%
0.0001
8.77%
0.70%
0.0001
3.51%
-2.80%
0.0001
-2.50%
0.07% Mean
11.34%
Standard deviation17.84%
variance
3.18%

3.34%
-3.21%
8.61%
-7.54%
-1.61%
-4.26%
0.68%
2.34%
1.80%
-3.34%
-2.33%
1.31%
1.59%
0.54%
-2.63%
6.95%
26.43%
6.99%

-11.66%
11.69%
-5.45%
-4.61%
-2.35%
-7.00%
-0.57%
7.22%
0.28%
1.22%
2.61%
1.92%
4.26%
1.28%
-2.41%
-2.27%
37.28%
13.90%

Excess return
3M (MMM)Johnson and
IBM
Johnson DFT
MSFT
PG
WMT
DJW
6.09%
0.50%
4.73%
5.28%
13.73%
-4.76%
2.67%
3.39%
0.85%
1.32%
-2.20%
8.04%
1.48%
3.30%
2.07%
1.42%
3.27%
1.44%
2.22%
8.37%
-3.20%
0.90%
3.85%
0.75%
10.07%
1.09%
5.57%
6.15%
6.99%
2.09%
9.27%
9.54%
-13.49%
-3.22%
1.72% -14.95%
-6.47%
-0.78%
-2.43%
-6.04%
-4.14%
2.45%
-5.06%
-9.15%
-2.29%
3.55%
1.65%
-4.37%
-8.14%
-2.61%
6.00%
1.14%
5.36%
-2.47%
-0.83%
-2.19%
0.49%
-1.14%
1.54%
-3.15%
3.95%
-5.13%
-3.77%
-1.25%
-2.35%
3.27%
-0.53%
6.84%
-2.88%
3.22%
1.09%
-1.89%
3.96%
10.90%
4.60%
0.89%
2.10%
6.22%
5.62%
3.98%
1.37%
-3.56%
0.73%
-0.22%
-4.51%
-2.30%
0.82%
0.76%
5.53%
3.71%
0.31%
6.52%
-3.59%
-0.14%
-7.29%
2.80%
1.86%
-3.38%
10.37%
7.76%
-0.65%
-1.15%
3.95%
2.71%
2.76%
0.48%
3.74%
-5.32%
10.48%
5.33%
0.25%
5.18%
0.33%
-2.61%
-1.06%
-9.99%
-4.71%
-3.94%
-0.15%
-1.02%
-2.87%
2.86%
7.04%
-0.22%
8.88%
6.81%
1.20%
3.05%
10.38%
8.66%
8.94%
2.26%
4.34%
0.48%
6.73%
7.71%
-7.61%
-0.93%
-3.64%
-2.10%
-8.57%
-2.44%
-1.49%
-4.32%
8.30%
-1.64%
3.97%
2.75%
12.15%
2.76%
6.48%
7.07%
-0.41%
1.29%
-1.42%
-3.38% -10.81%
-1.83%
-4.94%
-3.59%
-10.01%
-8.51%
-2.41%
15.18% -15.15%
-1.73%
-5.20%
-7.93%
6.11%
-1.40%
0.57%
2.70%
4.24%
-1.00%
-3.53%
1.39%
4.25%
3.50%
0.85%
10.55%
2.16%
-0.03%
3.40%
5.14%
0.22%
0.97%
4.36%
17.96%
2.21%
2.80%
1.20%
2.55%
-2.64%
-2.41%
-6.51%
-7.66%
-7.57%
2.24%
-0.05%
-3.47%
6.75%
2.49%
3.58%
12.76%
3.66%
-2.77%
-1.54%
0.80%
5.94%
7.27%
5.23%
6.24%
6.51%
7.49%
9.80%
6.50%
-0.32%
-3.05%
0.83%
13.17%
7.82%
0.90%
1.20%
0.00%
2.34%
0.75%
1.32%
1.88%
4.34%
7.03%
-3.52%
2.27%
2.98%
0.05%
0.55%
22.21%
5.36%
-2.52%
2.54%
3.53%
17.32%
7.20%
12.93%
13.64%
-1.06%
9.47%
2.96%
8.57%
5.24%
2.96%
-1.76%
-0.57%
13.80%
-1.61%
-2.61%
-0.64%
-0.01%
6.26%
3.51%
11.47%
3.72%
5.05%
-0.79%
4.06%
15.85%
-0.46%
6.52%
23.51%
10.31%
5.88%
-3.28%
7.34%
9.36%
5.19%
5.26%
29.17%
13.76%
-2.25%
6.41%
7.72%
-14.57% -12.61%
0.96%
42.81%
-4.97% -11.62%
4.50% -11.73%
-6.53%
-3.60%
8.89%
80.30% -12.03% -11.22% -15.97%
-8.84%
-14.03%
2.13%
3.13%
-3.51%
-3.83%
-3.96%
0.74%
-0.60%
4.93%
-3.71% -11.74% -65.64%
-8.86%
-0.29%
0.13%
-5.33%
-5.88% -11.47% -20.53% -59.14% -16.36%
-6.81%
-6.82% -14.07%
-4.60%
-1.64%
-3.92% -12.00%
-2.21%
-0.12%
1.38%
-6.01%
2.42%
3.52%
-4.52%
7.36%
6.54%
6.55%
1.17%
1.45%
1.14%
6.41%
7.96% -12.29%
-6.53%
8.34%
4.30%
0.24%
-10.28%
-3.59%
-8.43%
-6.94%
-2.84%
-7.94%
-2.68% -10.20%
1.50%
0.17%
7.66%
12.42%
-0.36%
-1.49%
-0.01%
-1.43%

-2.85%
0.94%
-0.95%
-5.55%
1.27%
-3.04%
-7.72%
2.84%
2.88%
2.44%
-1.34%
6.85%
8.28%
3.17%
0.33%
8.25%
22.67%
5.14%

3.42%
4.68%
-1.23%
-5.35%
-1.55%
4.60%
-0.82%
6.33%
2.80%
-1.82%
-2.62%
-0.85%
6.58%
-4.26%
-5.24%
3.99%
15.63%
2.44%

4.82%
1.12%
6.70%
-0.92%
2.77%
-9.11%
-1.43%
0.95%
5.82%
5.12%
-1.27%
4.70%
8.43%
1.41%
-6.00%
16.99%
19.73%
3.89%

9.17%
-0.80%
-2.45%
-12.11%
5.29%
-12.74%
-67.95%
-1.06%
4.09%
-2.29%
2.98%
3.18%
-0.80%
3.83%
1.27%
18.54%
72.39%
52.40%

0.46%
4.35%
-16.24%
-8.43%
5.94%
-8.43%
24.93%
2.54%
-0.59%
-1.62%
-3.99%
2.83%
7.40%
-1.06%
-8.42%
4.82%
27.79%
7.72%

-3.77%
5.87%
1.15%
-10.46%
-0.80%
6.44%
-0.68%
7.69%
5.57%
1.66%
-3.71%
-1.33%
2.52%
-0.53%
-2.14%
3.51%
16.63%
2.76%

10.06%
6.74%
-2.28%
6.75%
-0.34%
5.94%
3.57%
0.02%
-4.56%
-4.50%
1.06%
-0.22%
2.05%
-2.35%
1.28%
8.34%
15.71%
2.47%

4.54%
-0.04%
-3.04%
-4.64%
-0.81%
-4.02%
0.24%
4.02%
1.09%
-1.47%
-1.62%
4.31%
5.73%
0.69%
-2.81%
1.44%
17.41%
3.03%

Table 1: Risk parameter (annualized)

SD of excess
DJW
0.174119
Coca Cola
0.178364
Disney
0.264334
General Electric
0.372762
3M (MMM)
0.226714
Johnson and Johnson 0.156344
IBM
0.197273
DFT
0.723854
MSFT
0.277876
PG
0.166264
WMT
0.157103

Beta
1.000000
0.623829
1.267653
1.747238
1.007914
0.621609
0.709920
0.827465
1.024980
0.549072
0.420442

SD of
SD of residuals
0.174119
0.000000
0.111269
0.144608
0.335084
0.147284
0.651304
0.217850
0.228508
0.143746
0.097185
0.114489
0.140048
0.154748
0.598964
0.715377
0.284817
0.211477
0.091291
0.139043
0.066053
0.140073

correlation
1.000000
0.610698
0.833185
0.814459
0.775821
0.689755
0.626140
0.198369
0.655712
0.578455
0.465035

return
0.000726
0.010284
0.005342
-0.002591
0.006045
0.003381
0.013679
0.014900
0.001844
0.003867
0.006700

The index model covariance matrix

DJW
BETA
DJW
1.000000
Coca Cola
0.623829
Disney
1.267653
General Electric
1.747238
3M (MMM)
1.007914
Johnson and Johnson 0.621609
IBM
0.709920
DFT
0.827465
MSFT
1.024980
PG
0.549072
WMT
0.420442

1.000000
0.030317
0.018913
0.038432
0.052972
0.030557
0.018846
0.021523
0.025087
0.031075
0.016646
0.012747

Risk-free rate
Theta

0.001
0.052524186

Super Portfolio of P1 and RFA

Weight of RFA
Expected return
Variance
St. Deviation

0
0.019050915
0.118108121
0.343668621

Coca Cola
Disney
General Electric3M (MMM)
0.623829
1.267653
1.747238
1.007914
0.018913
0.038432
0.052972
0.030557
0.032710
0.023975
0.033045
0.019063
0.023975
0.070411
0.067150
0.038736
0.033045
0.067150
0.140013
0.053391
0.019063
0.038736
0.053391
0.051462
0.011756
0.023890
0.032928
0.018995
0.013427
0.027284
0.037606
0.021693
0.015650
0.031801
0.043832
0.025285
0.019385
0.039392
0.054295
0.031321
0.010385
0.021102
0.029085
0.016778
0.007952
0.016158
0.022272
0.012848

Coca Cola
Disney
General Electric
3M (MMM)
Johnson and Johnson
IBM
DFT
MSFT
PG
WMT
sum
return
standard deviation
variance

P1
0.309153653
0.095803949
-0.447529987
0.071469117
0.015457208
0.41470736
0.437570031
-0.184903344
0.023489161
0.264783829
1.000000978
0.019050915
0.343668621
0.118108121

3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
0.00%

10.00%

20.00%

30.00%

40.00%

0.00000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.02091
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.02169
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

Johnson and Johnson

IBM
DFT
MSFT
PG
0.621609
0.709920
0.827465
1.024980
0.018846
0.021523
0.025087
0.031075
0.011756
0.013427
0.015650
0.019385
0.023890
0.027284
0.031801
0.039392
0.032928
0.037606
0.043832
0.054295
0.018995
0.021693
0.025285
0.031321
0.024822
0.013379
0.015594
0.019316
0.013379
0.039227
0.017810
0.022061
0.015594
0.017810
0.532523
0.025713
0.019316
0.022061
0.025713
0.076574
0.010348
0.011818
0.013774
0.017062
0.007923
0.009049
0.010547
0.013065

0.000000
0.000000
0.000000
0.04746
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.02066
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.01311
0.000000
0.000000
0.000000
0.000000
0.000000

WMT
0.549072
0.016646
0.010385
0.021102
0.029085
0.016778
0.010348
0.011818
0.013774
0.017062
0.028473
0.006999

-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4

0.420442
0.012747
0.007952
0.016158
0.022272
0.012848
0.007923
0.009049
0.010547
0.013065
0.006999
0.024980
St. Deviation
34.37%
48.11%
41.24%
34.37%
27.49%
20.62%
13.75%
6.87%
0.00%
6.87%
13.75%

Exp. Return
1.91%
2.63%
2.27%
1.91%
1.54%
1.18%
0.82%
0.46%
0.10%
-0.26%
-0.62%

Series1

50.00%

60.00%

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.02395
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.51176
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.04472
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.01933
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.01962

Table 1: Risk parameter (annualized)

DJW
Coca Cola
Disney
General Electric
Hershey Food
FedEx
IBM
NOC
UNH
SYY
TGT

SD of excess
0.174119
0.178364
0.264334
0.372762
0.226714
0.156344
0.197273
0.723854
0.277876
0.166264
0.157103

Beta
1.000000
0.623829
1.267653
1.747238
1.007914
0.621609
0.709920
0.827465
1.024980
0.549072
0.420442

SD of
SD of residuals
0.174119
0.000000
0.111269
0.144608
0.335084
0.147284
0.651304
0.217850
0.228508
0.143746
0.097185
0.114489
0.140048
0.154748
0.598964
0.715377
0.284817
0.211477
0.091291
0.139043
0.066053
0.140073

correlation
1.000000
0.610698
0.833185
0.814459
0.775821
0.689755
0.626140
0.198369
0.655712
0.578455
0.465035

return
0.000726
0.010284
0.005342
-0.002591
0.006045
0.003381
0.013679
0.014900
0.001844
0.003867
0.006700

The index model covariance matrix

DJW
BETA
DJW
1.000000
Coca Cola
0.623829
Disney
1.267653
General Electric
1.747238
3M (MMM)
1.007914
Johnson and Johnson 0.621609
IBM
0.709920
DFT
0.827465
MSFT
1.024980
PG
0.549072
WMT
0.420442

1.000000
0.030317
0.018913
0.038432
0.052972
0.030557
0.018846
0.021523
0.025087
0.031075
0.016646
0.012747

Coca Cola
Disney
General Electric3M (MMM)
0.623829
1.267653
1.747238
1.007914
0.018913
0.038432
0.052972
0.030557
0.032710
0.023975
0.033045
0.019063
0.023975
0.070411
0.067150
0.038736
0.033045
0.067150
0.140013
0.053391
0.019063
0.038736
0.053391
0.051462
0.011756
0.023890
0.032928
0.018995
0.013427
0.027284
0.037606
0.021693
0.015650
0.031801
0.043832
0.025285
0.019385
0.039392
0.054295
0.031321
0.010385
0.021102
0.029085
0.016778
0.007952
0.016158
0.022272
0.012848

Macro forecast and forecast of anpha value

DJW
Anpha
Risk premium

Coca Cola
Disney
General Electric3M (MMM)
Johnson and Johnson
0.000000
0.009799
0.004444
-0.003798
0.005313
0.002898
0.000593
0.010169
0.010550
0.010834
0.010396
0.010167

Computation of Optimal Porfolio

DJW
variance of
anpha/varianc
weight of each
weight^2

Portfolio 1

Coca Cola
Disney
General Electric3M (MMM)
0.020911
0.021693
0.047459
0.020663
2.173788
0.468605
0.204856
-0.080020
0.257126
1.000000
0.215571
0.094239
-0.036811
0.118285
0.046471
0.008881
0.001355
0.013991

anpha of
residue
initial position
Adjusted
beta
Risk premium
SD
Sharpe ratio

-2.047751
1.000000
0.000593
0.174119
0.003403

0.008331
0.003832
111.225840
3.047751
0.680880
0.008734
0.133744
0.065305

0.002112
0.000972

0.000419
0.000193

0.000140
0.000064

0.000628
0.000289

0.134479
0.002192

0.058789
0.002274

-0.022964
0.002336

0.073789
0.002241

14.00%

weight of
-0.400000
-0.200000
0.000000
0.200000

Standard
18.87%
10.95%
9.38%
7.82%
6.26%

Return
2.55%
11.67%
10.02%
8.37%
6.71%

0.400000
0.600000
0.800000
1.000000
1.200000
1.400000

4.69%
3.13%
1.56%
0.00%
-1.56%
-3.13%

5.06%
3.41%
1.75%
0.10%
-1.55%
-3.21%

12.00%
10.00%
8.00%
6.00%
4.00%
2.00%

-4.00%

0.00%
-2.00%
0.00%

2.00%

4.00%

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.020911
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.021693
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.047459
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

Johnson and Johnson

IBM
DFT
MSFT
PG
0.621609
0.709920
0.827465
1.024980
0.018846
0.021523
0.025087
0.031075
0.011756
0.013427
0.015650
0.019385
0.023890
0.027284
0.031801
0.039392
0.032928
0.037606
0.043832
0.054295
0.018995
0.021693
0.025285
0.031321
0.024822
0.013379
0.015594
0.019316
0.013379
0.039227
0.017810
0.022061
0.015594
0.017810
0.532523
0.025713
0.019316
0.022061
0.025713
0.076574
0.010348
0.011818
0.013774
0.017062
0.007923
0.009049
0.010547
0.013065

IBM

DFT
0.013139
0.010220

MSFT
0.014284
0.010289

PG
0.001102
0.010406

0.000000
0.000000
0.000000
0.000000
0.020663
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.013108
0.000000
0.000000
0.000000
0.000000
0.000000

WMT
0.549072
0.016646
0.010385
0.021102
0.029085
0.016778
0.010348
0.011818
0.013774
0.017062
0.028473
0.006999

0.420442
0.012747
0.007952
0.016158
0.022272
0.012848
0.007923
0.009049
0.010547
0.013065
0.006999
0.024980

WMT
0.003431
0.010125

Johnson and Johnson

IBM
DFT
MSFT
PG
0.013108
0.023947
0.511765
0.044723
0.221093
0.548672
0.027912
0.024639
0.101709
0.252404
0.012840
0.011334
0.010345
0.063708
0.000165
0.000128

0.006346
0.010048

WMT
0.019333
0.177469
0.081640
0.006665

Overall Pf
0.019621
0.323438
0.148790
0.022138

0.000295
0.000136

0.003316
0.001526

0.000183
0.000084

0.000012
0.000006

0.000280
0.000129

0.000944
0.000434

0.063449
0.002192

0.157457
0.002203

0.008010
0.002218

0.007071
0.002243

0.050930
0.002183

0.092819
0.002166

Series1

4.00%

6.00%

8.00%

10.00%

12.00%

0.027401
0.025406
0.188735
0.134614

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.023947
0.000000
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.511765
0.000000
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.044723
0.000000
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.019333
0.000000

0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
0.019621