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

A B B India Ltd.Aarti IndustriesApollo
Ltd. Tyres Ltd.Arvind Ltd. Ashok Leyland Ltd.
-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

A B B India Ltd.Aarti IndustriesApollo
Ltd. Tyres Ltd.Arvind Ltd. Ashok Leyland Ltd.
-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.

A B B India Ltd.Aarti IndustriesApollo
Ltd. Tyres Ltd.Arvind Ltd. Ashok Leyland 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.Aarti IndustriesApollo
Ltd. Tyres Ltd.Arvind Ltd. Ashok Leyland Ltd.
A B B India Ltd.
0.25292
0.14174
0.18979
0.17810
0.17829
Aarti Industries Ltd.
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
Bajaj Holdings & Invst. Ltd.
0.34601
0.19750
0.35652
0.39809
0.42017

=VAR(G19:G29) 86.1 999.72% 3.95 2772. Ltd.20% -3.95 714.05 727.8 1039.05 1459.4 749.53% -31.26% -8. 31.72% 15.75 4156.1 2359.3 2209.Index Bajaj Holdings & CNX500_Index Invst.14% 24.=AVERAGE(G19:G29) 0.45 4424.5 513.73% 66. 38.20% 27.58% <-.57% 66.90% 4.10% -67.=SQRT(G32) Bajaj Holdings & Invst. Ltd.16% 8.82% -23.2 437.15 3393.25 2154.50% .51% -240.01% 25. Ltd.20% 25.14% 63.05 4349 229.76% 17.54% 17.82% -233.74965 <-.92% 38.38% <-.94% -15.2 1768.44% 65.74% 90.04% 7.12% -8.32% 6.17% 72.85 Bajaj Holdings & CNX500_Index Invst.17% -16. 297.9 981.48% 82.94% 19.65 2585.6 670.7 4082.52% 59.05 564.

34601 0.19750 0.34601 0. Ltd.74965 .Bajaj Holdings & Invst. 0.35652 0. Ltd.42017 0.35652 0. 0.42017 0.39809 0.74965 Bajaj Holdings & Invst.19750 0.39809 0.

Ashok Leyland Bajaj Ltd. 50.87% -8.4417 0.61% 32.67% 28.25292 0.33% 66. Ltd.10% 90.26175 0.Regarding M and M-1 Returns Date A B B India Ltd.54% 22.69% 15.84% 72.85% 20.85% 4. Ltd.52% 8.72% 40.2299 0.46% 54. Ashok Leyland Bajaj Ltd.81% 82.14% Jan-09 -83.92% Jan-07 35.71% 3.90% -233.07% -35. Ltd.74% -24.57% -87. 24.{=MMULT(TRANSPOSE(B4:B14-B17).=COVAR(B4:B14.66% 86.12% 57.57% Jan-05 37.95% 51.86% 63. Ltd.46% 54.33% 66.87% -96.55% Covariance (ABB India Ltd.43% -16.81% 19.81% 19.96% 17.55% <-.85% 20.10% Jan-10 51. Ashok Leyland Bajaj Ltd.74965 <-.43% 51. Ltd.68% -7.=COVAR(G4:G14.12885 <-.03% 88.26% -45.2380 0.33040 0.38% <-.16% 69.97% 90.=COVAR(G4:G14.78% 66.35% 127.2618 0.2529 0.82% 59.39% -3.2694 0.=STDEV(G4:G14) 47.62% 98. Holdings & Invst.26% 40.95% 51.2380 0.94% 110.4417 0.TyresArvind Ltd. Ashok Leyland Bajaj Ltd.54% 22. Aarti Industries) 0.Aarti Industries Apollo Ltd.27% -118.6815 <-.12% 51.=VARP(G4:G14) 0.2694 0.81% 82.TyresArvind Ltd. Jan-02 -17.37% 15.84% 4.35% 34.2963 0.53% Jan-03 22.70% 57.7497 <-.43% 7..TyresArvind Ltd.20% Jan-08 43.2299 0.55% 53.4858 0.48% 86.3004 0.G4:G 0.90% 48.14174 <-.95% 31.90% 48.96% 25.95% -27.31% 15.C4:C14) 0.=VAR(G4:G14) 0.38% 48.91% -93.40% 38.Aarti Industries Apollo Ltd.32% 45. Holdings & Invst. 0.11% -25.12% Mean A B B India Ltd. Ltd.G4:G Standard Deviation A B B India Ltd.65% -36.=STDEVP(G4:G14) 47.6815 <-. Ltd. Holdings & Invst.Aarti Industries Apollo Ltd.68% 34.20% 12.12885 .92% 3.TyresArvind Ltd.32% Jan-12 10.63% 110.90% Jan-04 87.01% 7.3004 0.58% <-.48583 0.14% -7.29631 0.=AVERAGE(G4:G14) 24.02% 23.14% Jan-11 -10.38% Variance A B B India Ltd.96% 17.3304 0.29% 54.Aarti Industries Apollo Ltd.C4:C14-C17)/(COUNT(A4:A14)-1)} 0. Ltd. Holdings & Invst.72% 25.94% Jan-06 95.78% 66.43% 7.

& Invst.=VARP(G4:G14) <-. <-. Ltd.=VAR(G4:G14) <-. <-. Ltd.G4:G14)*(COUNT(F4:F14)/(COUNT(F4:F14)-1)) & Invst. Ltd.=AVERAGE(G4:G14) & Invst.=COVAR(G4:G14.=COVAR(G4:G14.=STDEV(G4:G14) <-.& Invst.G4:G14) <-.=STDEVP(G4:G14) . <-. Ltd.

35% 127.57% Jan-05 37.240482 0.03% 88.189788 0.01% 7.330398 0.94% Jan-06 95.14% Jan-11 -10.12% 51.178288 0.346012 0.12% Use of Offset A B B India Aarti Ltd. Jan-02 -17.178288 0. Industries Apollo Ltd.1975 Apollo Tyres Ltd. Industries Apollo Ltd.02% 23. Holdings & Invst. Ltd. Ashok Leyland Bajaj Ltd.27% -118.10% Jan-10 51.117267 0.71% 3. 5 0.296311 0.52% 8.87% -96.11% -25.62% 98.61% 32.43% -16.Use of offset and covar functions to compute variance-covariance Matrix Returns Date A B B India Aarti Ltd.67% 28.14% -7.31% 15.252915 0.95% -27.398094 0.26% 40.35% 34.272104 0. 0 1 2 3 4 5 A B B India Ltd.159072 0.74965 .10% 90.272104 0.68% -7.40% 38.90% Jan-04 87.92% Jan-07 35.33% 66.159072 0.346012 <-.1975 0.420166 0.20% 0.33% 66.66% 86.74% -24.117267 0.53% <-.267251 0. 4 0. Ltd.97% 90.69% 15.94% 110.38% 48.72% 40.63% 110. 1 0.57% -87.32% 45.65% -36.240482 0.39% -3.267251 0.87% -8. TyresArvind Ltd.72% 25. Holdings & Invst.07% -35.485829 0.141736 0.356518 0.189788 0.261752 0.96% 25. TyresArvind Ltd.12% 57. Ltd.90% -233.=COVAR(OFFSET($B$4:$B$ Aarti Industries Ltd. Ltd.68% 34.279987 0.84% 72.26% -45.178096 0.84% 4.55% 53.82% 59.=Sheet1!G19 Jan-03 22.95% 31. 0 0. 3 0.14% Jan-09 -83. Ashok Leyland Bajaj Ltd.178096 0.32% Jan-12 10.37% 15.141736 0.356518 Arvind Ltd.92% 3.398094 Ashok Leyland Ltd. 2 0.279987 0.420166 Bajaj Holdings & Invst. Ltd.128851 Jan-08 43.91% -93.85% 4.86% 63.20% 12.

=COVAR(C4:C14.H$18).0.OFFSET($B$4:$B$14. <-. Ltd.$B19))*COUNT($A$4:$A$14)/(COUNT($A$4:$A$14)-1) .=COVAR(OFFSET($B$4:$B$14.D4:D14)*COUNT(A4:A14)/(COUNT(A4:A14)-1) ngs & Invst.0.0.159072 <-.

($A$4:$A$14)-1) .

G24:G29) .1753689 0.00% Num 2.224346 0. Ltd.384564 0.020563 -1.2485214 0.2081111 0.178288 0.093579 Weights 1.06091 0.0737786 41.398575 -0.178288 0.TRANSPOSE(B13:G13)))} 35. 0.=SUM(C40:C45) 41. Holdings & Invst.141736 0.141736 0.C24:C29))} 40. A B B India Ltd.214705 0.B11:G11) 0.=SUMPRODUCT(C40:C45.420166 0.204235 -0.64998 0.=SUMPRODUCT(B13:G13.96% 17.159072 0. Ltd. 32. Ashok Leyland Ltd.2799873 0.145699 1.034274 -0.14838 -0. Aarti Industries Ltd.54% 22. Apollo Tyres Ltd.3980935 Ashok Leyland Ltd.00% Num 2.252915 0. Ltd.38% GMVP 0.159072 0.099689 1 <-. 0.07% <-.=SQRT(C33) 9.2672513 0.26745 2.056103 -0.81% 19.117267 0.129402 0. Ltd.058926 1 <-. 0.164823 <-.240482 0. Bajaj Holdings & Invst.Computation of GMVP Sample Variance-Covariance Matrix A B B India Ltd.267251 0.=SUM(B13:G13) GMVP Mean GMVP Variance GMVP SD Envelope Portfolio X Constant A B B India Ltd. Aarti Industries Ltd.27738 1.00% <-. 0.7496501 Mean Return 24.296311 0.MMULT(B4:G9.122681 <-.3460123 Aarti Industries Ltd.261752 0.MMULT(B4:G9.1975004 Apollo Tyres Ltd.43% 7.272104 0.TyresArvind Ltd.408753 0. Arvind Ltd.{=MMULT(TRANSPOSE(C24:C29).62480 -0.3980935 0.178096 0. Ashok Leyland Ltd. Apollo Tyres Ltd.1996348 0.356518 0. Aarti Industries Apollo Ltd.58290 Sum 100.188605 X_Mean X_Variance X_SD Envelope Portfolio Y Constant A B B India Ltd.36% <-.106809 -0.=SUM(C24:C29) MeanRet 0.2721038 0.292613 -0. Bajaj Holdings & Invst.989346 -1.=SUMPRODUCT(C24:C29.03% 7.189788 0. Ashok Leyland Bajaj Ltd.{=MMULT(B13:G13.346012 0.420166 Bajaj Holdings & Invst.044798 -2. 0.1975 0.356518 Arvind Ltd.81% <-.485829 0.117267 0.22065 0.=B24/SUM($B$24:$B$29) -0.178096 0.189788 0.60% <-.279987 0.070837 -0.160517 <-.85% 20. Y_Mean Weights of X 1. 0.240482 0.186066 0.330398 0.G24:G29) 0. Ltd.94294 -2. Arvind Ltd.

17% 2.07% 1.6 37.1 35.14% 41.79% 38.C40:C45))} 41.09% 39.87% 41.9 37.3 40.05% 4 38.99% 42.6 36.82% 40.1 36.74% -0.96% 0.1 41.2 37.59% 7.37% 7.51% <-.1 38.00% 34.47% 8.2 39.18% -0.9 39.00% 25.5 41.8 37.7 38.74% 0.7 36.3 36.38% 4.8 35.08% 40.42% 36.42% 41.1 40.57% 36.00% 38.00% =(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 41.00% 36.39% 2.3 38.70% 41.49% 6.00% 10.C40:C45))} Single Portfolio Calculation Prop in X P_Mean P_Variance P_SD 45.4 38.05% 37.MMULT(B4:G9.5 35.86% 39.MMULT(B4:G9.1 41.71% 5.93% 5.4 41.00% 0.00% 20.72% 37.Y) 0.41% 37.00% =(B54*C32)+((1-B54)*C47) 35.92% 8.5 39.02% 30.42% 41.Y_Variance Y_SD 0.171569 41.60% 4.{=MMULT(TRANSPOSE(C40:C45).50% 3.04% 6.28% 36.16% 5.64% 39.68% 35.62% 1.2 35.00% 5.26% 6.02% 35.8 39.42% <-<-<-<-- 0.84% 1.6 40.57% 40.7 40.79% 35.74% 0.172349 <-.72% 3.90% 35.60% 38.28% 3.9 36.70% 8.89% 37.42% 39.{=MMULT(TRANSPOSE(C24:C29).2 41.4 36.33% 39.51% 0.00% 35.14% 7.168431 <-.59% 35.29% 1 40.00% .83% 4.00% 0.00% 15.=SQRT(C48) Cov(X.23% 37.60% 41.20% 38.81% 7 36.15% 36.5 37.95% 2.25% 9.33% 40.

79% 32.91% 33.03% 34.35% 35.5 11.4 12.09% 35.36% .22% 31.12% 35.67% 31.46% 33.03% 35.34% 32.80% 34.3 13.4 GMVP 35.03% 35.23% 33.1 15.1 12.00% 30.04% 35.68% 33.6 13.04% 35.7 10 10.28% 35.89% 31.56% 32.09% 35.77% 30.8 12.58% 34.13% 33.35% 34.50% 35.4 9.6 10.22% 35.27% 35.7 13 13.55% 30.3 10.22% 35.33% 32.34% 35.5 14.2 14.9 11.12% 31.9 14.8 15.41% 35.13% 35.9.06% 35.06% 35.17% 35.03% 35.01% 32.17% 35.2 11.44% 31.

One 1 1 1 1 1 1 <-.{=MMULT(TRANSPOSE(I4:I9).I4:I9))} E(B13:G13)))} MMULT(B4:G9. Ltd.C24:C29))} .MMULT(MINVERSE(B4:G9).Bajaj Holdings & Invst.MINVERSE(B4:G9))/MMULT(TRANSPOSE(I4:I9).=Sheet1!G31 <-.

00% 40.00% 42.00% 41.00% 39.00% 37.C40:C45))} 36.MMULT(B4:G9.00% 43.00% 38.C40:C45))} MMULT(B4:G9.00% .

.

NVERSE(B4:G9).I4:I9))} .

Industries Apollo Ltd.116881 0.188478 0.296311 0.027906 0.194282 0.74965 0 1 12.95% -27. Ashok Leyland Bajaj Ltd.82% 59.65% -36.122595 0.91% -93. TyresArvind Ltd.308133 0.096604 0.14% -7.90% -233.74% 51.206478 0.485829 0.69% 15.102825 1.544345 0.87% -96.54% 22. Ashok Leyland Bajaj Ltd.502907 0.68% 34.12% 57.57% 66.12% -8.485829 0.96% 17.85% 20.92% 3.17% 43.72% 22.33% 66.26% 40.511617 0. Bajaj Holdings & Invst.200149 0.298689 0.17% 95.68% -7.32% 45.32% 6.252915 0.11% -25.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.63% 110.252915 0.10% 90. Ltd.261752 0.865823 0.40% 38. A B B India Aarti Ltd.43% -16.71% 3.01% 7.20% -10.200149 0.43% 0.749095 Single Index Estimates Mean Return Variance of Returns 24. Ashok Leyland Ltd.74% -24.85% 20.117911 0.126298 0.485829 0.084663 1.55% 53. Industries Apollo Ltd.94% 19.85% 4.27% -118.296311 0. TyresArvind Ltd.37% 15.73% 87.03% 88.20% 27.116881 0.191082 0.43% 7.196853 0.72% 40.29377 0.84% 72.86% 63.61% 32.15293 1.118838 0.72% 37.96% 0. Ltd.185225 0.74965 0.04% Mean Return Variance SD 24.261752 0.26% 10.172056 0.12% 51. -17.081402 -0. Apollo Tyres Ltd.14% 24.95% 31.02% 23.695903 1. Aarti Industries Ltd.10% -67.57% -87.330398 0. Ltd.97% 90.92% 38.059045 0.07% -35.188478 0.196853 0.96% 25.66% 86.01% 35. Holdings & Invst.35% 34.185225 0.191082 0.330398 7.35% 127. Holdings CNX500_Index & Invst.38% 0.38% 12.26% -45.72% 25.206478 0.122595 0.74965 .81% 19.154846 0.38% 48. Ltd.14% 63.697014 0.96% 17. Arvind Ltd.53% -31.393504 Alpha Beta 0.194282 0.87% -8. Ltd.94% 110. 0.52% 8.54% 22.308133 0.84% 4.574803 0.261752 0.330398 0.137696 1.126298 0.33% 66.31% 15.296311 0.96% Single Index Model Var-Covar Matrix A B B India Ltd.90% 4.82% -83.20% 12.67% 28.317439 0.252915 0.39% -3.317439 0.81% 19.298689 0.62% 98.29377 0.118838 0.

00% 0.00% 0.99324 -0.21338 0.275926 0.25699 0.19032 -0.040202 0.079577 0.43398 0.036076 -0.183322 0. e_ABB 0.34828 -0.00% 0.376923 0.04713 -0.076208 -0.009194 -0.470449 0.05633 0.076187 0.09308 0.32354 -0.534232 0.24356 -0.049925 0.217274 -0.561 -0.000778 0.44256 -0.11298 -0.79017 -0.066145 -0.525286 .44297 0.07141 1.27211 0.13921 -0.106134 e_Aarti 0.01557 -0.285404 0.672427 0.375302 0.408232 -0.73059 -0.090374 0.236553 0.14295 0.134186 0.411423 -0.CNX500_Index ngs & Invst.557752 0.272 0. Ltd.07142 -0.00% 0.70944 -0.098032 0.622386 -0.221323 0.00% 0.048596 -0.318783 -0.27108 -0.142071 0.296575 0.282093 0.16246 0.229169 -0.00% 0.05115 0.26215 0.113381 0.470309 0.03757 -0.207645 0.212309 0.521144 0.03875 -1.492644 0.361626 -0.01515 0.07022 -0.200503 0.31184 -0.440391 0.

749095 4 5 6 Var(error) Excess Return ExcessReturn/Var(error)*Beta 0. 0. 1. 0.079577 0.084663 1.285404 0.2081111 Apollo Tyres Ltd.15809037 1.13795507 0.169378833 0.137696 1.762478155 Apollo Tyres Ltd.142071 0.499753344 0.040202 0.150732359 Optimal Portfolio Weights: When Short selling is not allowed Stocks Selected Rank Aarti Industries Ltd.11019545 0.339004664 .242748 0. Ashok Leyland Ltd.137696 Ashok Leyland Ltd.102825 0.079577 0 0 13.695903 1. 0.01359478 Ltd.986261837 Bajaj Holdings & Invst.221323 0.285404 0.144295326 A B B India Ltd. Beta Var(error) ExcessRet/Beta (ExcessRet/Beta)-C 1 0.102825 Bajaj Holdings & Invst. 0.040202 0.198521417 5.695903 Apollo Tyres Ltd.15 Beta 1. 0. 0.497147926 0.278851039 3.125368921 0.15809037 0.0737786 0.158111079 0.353357014 0.01359478 Ltd.137955073 0.285404 0 0 3.039583985 0.149634828 2.072141581 7.1496348 0.077202624 2 1.142071 0.227202624 0.062801 0.695903 0.13795507 1.1581111 0.084663 Arvind Ltd.172056 Aarti Industries Ltd.787786379 0.22720262 0.227202624 0.019378833 3 1.1743460 0.56498 0. 0.172056 0. 0.16937883 0.221323 0. 0. 0.00809037 Optimal Portfolio Weights: When Short selling is allowed Cut-Off 0.275926 0. 0.110195453 0.169378833 0.1996348 Arvind Ltd.174346 1. 0.142071 0.11019545 1.142071 0.023778553 0.15446838 Ashok Leyland Ltd.22720262 0.15809037 0.2485214 Aarti Industries Ltd.079577 0.0237786 0. 0.154845673 Var(error) Excess Return ExcessRet/Beta 0.102825 1.040202 0. 0. 0.172056 0.749095 Determination of Optimal Portfolio using Single Index Model Variance(Market) 0.1753689 Ashok Leyland Ltd.64900738 29. 0.16937883 1. 0. A B B India Ltd. 0.12628741 When Short is not allowed When Short Selling is allowed Stock ExcessRet/BetaVar(error) Z Weights Beta/Var Aarti Industries Ltd. 0.2243460 Bajaj Holdings & Invst.221323 0. Ltd.05 0.275926 0 0 6.013594777 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.1253689 0.221323 0.63040949 Arvind Ltd.1985214 0.15809037 0.040202 0.275926 0.Risk-Free Cut-Off Stock Mean Return A B B India Ltd.

787786 2.144295 0.317307 0.649007 0.256307 1.78441 8.239 75.132417 -0.072142 ng is allowed Z Weights 0.324518 4.32836 9 Cum_7 34.143961 0.5948 10 Ci 0.284934 14.188126 6.824272 8.17066 36.046039 0.560654 10.159035 0.142015 0.24687 0.15447 0.142456 0.06415 -0.2642 1.535154 8.062801 Weights 0.126287 .762478 0.278851 0.71436 -0.05341 -0.35878 51.67835 64.146787 0.17066 5.56498 7.205551 0.Single Index Model 7 8 Beta^2/Var(error) Cum_6 34.14452 0.17763 11.32652 Beta/Var(error) Z 3.14319 55.08752 10.242748 29.

35% 34. Arvind Ltd.6236148 0.146538445 A B B India Ltd.07% -83. Aarti Industries Ltd. 1.58% 69.63% 110.7060393 A B B India Ltd.35% -10.55% 53.12% 51.036948139 0.1183602 0.57% 51. #NAME? Apollo Tyres Ltd.43% 19.14% -7. Arvind Ltd.18% 51. Ltd.68% Mean Variance SD 24.419223343 0.86% 63.480246839 1. Apollo Tyres Ltd. -17. Bajaj Holdings & Invst.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.96% 26. Apollo Tyres Ltd.65% -36. Ltd.52% 8.95% -27. Bajaj Holdings & Invst.03% 37.857403747 0.94% 110. Arvind Ltd.770898587 0. Apollo Tyres Ltd.076048618 0.817912956 0.02% 35.72% 40.29% 50.81% 29.63% 54.29% avg corr CORR 0.311445756 0.913030255 0. A B B India Ltd.036948139 0.16% 17. Apollo Tyres Ltd.20% 12.26% -45.61% 32.770898587 1.920600391 0. Aarti Industries Ltd.957992 0. 20.95% 87.84% 95.38% 48.82% 59.74% -24.957991978 1. .392837595 0. Aarti Industries Ltd.39% -3.623614754 0.66% 86.704696098 1. Arvind Ltd.11% -25.91% -93.70% A B B India Ltd.87% -96.704696098 1.471995361 0.7843946 0.26% 22.12% 57.68% 34.85% 4.71% 3. Arvind Ltd.01% 7.37% 15.32% 43.97% 90.62% 98.33% 66. Ashok Leyland Ltd.31% 10.8574037 1. Ashok Leyland Ltd.54% 48.85% 25.27% -118.67% 28. Aarti Industries Ltd. Aarti Industries Ltd.

38% <-.58% <-.20% 15.04% 57.92% 38.40% 38.74% 127.10% 90.254178289 0.17% -35. Bajaj Holdings & Invst.14% 63.57% 66.73% 88.784394627 0.939033111 0.939033111 1.90% 4.17% 23.48% 7. Bajaj Holdings & Invst. 0.32% 6.913030255 0. .72% 31.=AVERAGE(G19:G29) 74.817912956 0.87% -8.69% 15.92% 3.034549356 Ashok Leyland Ltd.70603928 1.10% -67.33% 66.84% 72.43% -16.94% 19.72% 4.=SQRT(G32) Ashok Leyland Ltd. Ltd.04% 22.96% 25.82% -87.43% 33. Ltd.076048618 0.90% -233.97% <-.Ashok Leyland Ltd.53% -31.26% -7.20% 27.=VAR(G19:G29) 86.471995361 1.920600391 0.14% 24. Ltd.72% 25.480246839 0. CNX500_Index 40.01% 45.12% -8. Bajaj Holdings & Invst.

32% 43.257535493 0.61% 32.15795737 0.2189243 0. -17. 1 0.55% 53.207324 0.6670515 0.517747003 1 0.38% 48. Apollo Tyres Ltd.152178282 0. Aarti Industries Ltd.72% 40.140593756 0.14% -7. Ltd.85% 25.71% 3.152178282 0.29% 50.737624828 0.79464783 0.7851484 0.329765 .81% 29.97% 90. Ashok Leyland Ltd.70% 0.63% 110. Apollo Tyres Ltd.66% 86.03% 37.82% 59.804835833 0.26175187 0.62% 98.33% 66.1606931 0.67% 28.517747003 0.194858882 0.7171644 0.54% 48. Aarti Industries Ltd. Apollo Tyres Ltd.52% 8.86% 63.237930681 0.717164417 0.419048757 0.35% 34.68% 24.87% -96. Arvind Ltd.35% -10.296311433 0.207323969 0. Aarti Industries Ltd. Bajaj Holdings & Invst.26% 22. Aarti Industries Ltd.18% 51. Ltd.20% 12.74% -24.191541495 0. A B B India Ltd.571180757 0. 0.58% 69.817748568 0.43% 19.01% 7.11% -25. Ashok Leyland Ltd.96% 26.65% -36.12% 57.170972609 0. Bajaj Holdings & Invst.68% 34.39% -3.1948589 0.57% 51.84% 95.63% 54.27% -118.485829 0.26% -45.242051502 0.6596508 Var-Covar Matrix A B B India Ltd.85% 4. Arvind Ltd. A B B India Ltd.02% 35.508071668 0.149587513 0.61676007 0.252915313 0.16% 17.140593756 0. Apollo Tyres Ltd. Arvind Ltd.31% 10.149587513 0.374784539 0.12% 51.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 A B B India Ltd.5080717 0.37% 15.1915415 0. Aarti Industries Ltd. Apollo Tyres Ltd. Arvind Ltd.94% 110.546428792 Correlation A B B India Ltd.91% -93.07% -83.29% 20.737624828 0. Arvind Ltd.571180757 1 0.95% -27.785148354 1 0.95% 87.

04% 22.1606931 0.90% -233.12% -8.330398081 0.659650763 1 0.57% 66.26% -7.10% 90.237930681 0.58% Ashok Leyland Ltd.72% 31. Bajaj Holdings & Invst.21892435 0. 0.48% 7. Bajaj Holdings & Invst.92% 3.804835833 0.94% 19.271945354 0.43% -16.40% 38.10% -67.170972609 0.242051502 0.20% 15.817748568 0.20% 27.96% 25.374784539 0.15795737 0.69% 15.79464783 0.87% -8.04% 57.92% 38.61676007 0.329765047 0. 0.419048757 0. Ltd.84% 72.53% -31.271945354 0.73% 88.257535493 0.97% 86. Bajaj Holdings & Invst. Ltd.32% 6.667051479 0.74% 127.43% 33.14% 24.844253394 1 Ashok Leyland Ltd.14% 63. CNX500_Index 40.38% 74.33% 66.01% 45.844253394 0.749650131 . Ltd.17% 23.Ashok Leyland Ltd.72% 4.72% 25.17% -35.90% 4.82% -87.

023779 (Ri-Rf)/SD 0. Apollo Tyres Ltd.109515 3. Ashok Leyland Ltd.544345 0.179866 0.567874 0.292474 0.125369 0.608164 3.117476 0.697014 0.027464 When short selling is not allowed 1/((1-r)SD) Zi Weights 4. Arvind Ltd.309329 0.198521 0.865823 Ri-Rf 0. Aarti Industries Ltd.697014 0.258621 1.511617 0.146411 5 4*5 Cum_2 Ci 0.265213 1.158111 0.179866 0. Ltd.207037 0. Ltd.250574 1.199635 0.394748 0.24666 0.488327 0.149635 0.05 2 (Ri-Rf)/SD i 0.224346 0.290461 0.217908 0.290461 0.174346 0.303315 0.511617 0.394748 0.698062 0.073779 Determination of cut-off rate Average Correlation SD 0. Bajaj Holdings & Invst.394748 0.383964 0.574803 0.292474 0.171525 0.502907 0.Optimization using Constant Correlation Model Risk-Free Rate Stock A B B India Ltd.208111 0.027464 4 r/(1-r+i*r) 0.546392 0 0 .248521 0. Ltd.163099 0 0 2. Arvind Ltd. Ashok Leyland Ltd. Apollo Tyres Ltd.102259 0. Bajaj Holdings & Invst.460864 0. Arvind Ltd.544345 0.990537 0.146141 0.292474 0.050236 0.290461 0.179866 0.280998 0.303315 0.835622 0.353349 0.175369 0.546429 1 Stock A B B India Ltd.027464 3 1 2 3 4 5 6 Computing weights for optimal portfolio Stock A B B India Ltd.15651 4. SD 0.502907 0. Apollo Tyres Ltd. Aarti Industries Ltd. Ashok Leyland Ltd.261092 0. Bajaj Holdings & Invst.546429 0.125811 4.394748 0. 0.865823 (Ri-Rf)/SD 0. Aarti Industries Ltd.303315 0. Ri 0.574803 0.215702 0.

select select select select t selling is not allowed Cut-off rate 0 When short selling is allowed Zi Weights 0.28877 0.48495 -0.10814 -0.32133 0.264081 -0.43581 .696704 0.294393 0.327586 0.293857 0.12033 -0.775259 0.

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