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ECONOMICS

FINANCIAL MANAGEMENT

2ND SEMESTER | 2014/2015

| GROUP 38 |

INTRODUCTION:

Exxon Mobil Corp. is an American multinational oil and gas corporation headquartered in

Irving, Texas, United States. It is a direct descendant of John D. Rockefeller's Standard

Oil Company, and was formed on November 30, 1999, by the merger of Exxon and Mobil

(formerly Standard Oil of New Jersey and Standard Oil of New York). The world's 5th

largest company by revenue, ExxonMobil is also the second largest publicly traded

company by market capitalization. The company was ranked No. 6 globally in Forbes

Global 2000 list in 2014.Exxon Mobil Corp., coded as XON by the NYSE and publicly

traded for the first time in the 2th of January 1970. Briefly, in this first report on Exxon, it

is intended to evaluate the risk and return of the companys stock.

| Ana Preto #2244 | Martim Moreira #2293 | Jos Loureno #2249 | Omar al Fannoush #1949 |

The study of expected returns normally is based on past performances of a security or index, fundamental tool that

allows managers and investors to choose which stocks and projects to invest. Analysts usually review historical

return data when trying to predict future returns or to estimate how much a security might react to a particular

situation, such as a drop in consumer demand. The most common method used is the computation of cumulative

and annualized average returns. Historical returns can also be useful when estimating where future points of data

may fall in terms of standard deviations. Therefore, in this section of the report, we are going to assess Exxon

Mobil Corp. returns through an historical perspective (since August 1980 until the end of February 2015) and

discuss the utility of this method.

First of all to perform the return analysis is necessary to calculate the percentage return (investor would earn per

month by investing in Exxon Mobil Corp.). We extracted monthly data about the gross return (capital gains +

dividends) through Bloomberg. We assumed that this assembly of data was the most suitable mainly because,

provides information with less variability than diary and in sufficient number of observations for a substantial

statistical analysis. The other reason is because both capital gains and dividends are included (as mentioned

before). Therefore, we computed monthly percentage returns and growth rates based on the monthly variation of

gross returns.

In order to do a comparative analysis of data, we took monthly data too from the market S&P500 index (SPX) and

one month US Treasury Bills (T-bills). Additionally the method for calculating rates of return for the market was

identical to the one described above, except on the T-Bills because the risk-free rates were already available. Thus,

arithmetic and geometric average annualized returns were calculated assuming that returns are independent and

identically distributed. The annual arithmetic average of the returns was obtained by multiplying the arithmetic

average of the monthly percentage returns by 12 and the annual geometric average of the returns was determined

by computing the geometric average of 1 plus the monthly rates of return, subtracting the result by 1 and finally

multiplying it by 12 (see Appendix 1 Table 1, Table 2, Table 3 for monthly and annual arithmetic and

geometric average returns). Compounded returns were also determined using 100% as a base value for all data sets,

allowing comparisons among securities, between Exxon Mobil Corp., S&P500 and T-Bills (see Appendix 1

Figure 1 for compounded returns from 1980 to 2015), through the following formula:

Compound Returns (t) = Compound Returns (t-1) x [1 + Monthly Returns (t)]

Through the analysis of the appendixes it is possible to observe that the geometric average annualized returns are

lower than the annual arithmetic average returns, for the Exxon Mobil security example. This inequality is totally

expected because arithmetic average is the sum of a collection of numbers divided by the number of numbers in the

collection thus considering each return as being independent from the others however, the geometric average

indicates the central tendency or typical value of a set of numbers by using the product of their values therefore

taking into account the effect of compounding. In other words, investment returns are not independent of each

other, so they require a geometric average to represent their mean. Based on the previous information and through

empirical studies its demonstrated that geometric average is more reliable and representative on measuring of the

average returns, therefore we can conclude that an investor who decides to invest in Exxon Mobil stock in the end

of 1980 would have earned an average of 1.07% per month and 12.9% on an annual reference, instead of 1.19%

and 14.33% respectively in an arithmetic average, considering the investor held the stock until now. Considering

the same logic, it is possible to assume that investors earned, on average, 8.14% per year with the S&P500

portfolio and 4,49% with one month US Treasury Bill (T-Bills).

Looking now for the representation of compounded returns allows the identification of strong moves and

disparities among the securities, namely concerning the positive growth of Exxon Mobil Corp. returns over the

1

years, as well as the returns of the S&P500, however much lower. In general terms, Exxon Mobil Corp. returns

have been much higher relatively to the market and to the risk-free security. Moreover, there was a continuous

growth from 2003 to 2008, instability from 2008 to 2010, due to the financial and economic crisis and a sharp

growth from 2010 to 2011 demonstrating a very effective recover from the economic crises. In 2014, Exxon Mobil

returns have reached the highest compounded return, meaning that for each dollar invested in August 1980,

investors would have earned $79, 75 in January 2015. The risk-free security has proved to be way beyond Exxon

Mobil Corp. and markets performance over the years.

As already mentioned, historical performance of a security may be used to predict future returns and the cost of

capital of an investment. However, this approach has some disadvantages: firstly, the future behavior of a security

may not be the same it was in the past, secondly the older historical data on returns is not very useful when

predicting future returns. This happens because the constant changes in the financial markets reality, thirdly

investors future expectations may not correspond to past estimations. Additionally expected returns obtained from

historical data are subject errors and volatility distorts results even when expectations and market circumstances

are similar. As a conclusion, despite being helpful, the average return that the investors earned in the past is not a

very reliable estimate of a securitys current and future expected returns. Instead, an alternative strategy based on

the Capital Asset Pricing Model (CAPM) should be used. In the following questions, techniques to estimate a more

reliable value of Exxon Mobil expected return will be properly studied.

Q2: Exxon Mobil (Systematic) Risk Analysis

In the sequence of what was previously referenced, in this section of the report its supposed to elaborate methods

that allow the calculation of the Exxon expected returns. Therefore, analyzing and quantifying the risk of the stock

is a fundamental procedure to keep in mind. All over the world, investors face uncertainty related to stock

performance, since companies returns are subjected to risk. Thus, to obtain Exxon risk profile is crucial to calculate

the firm volatility and its beta. The first objective is to elaborate the company beta defined by the standard

deviation of the returns. The second goal is to elaborate the volatility in order to have all requirements to calculate

the systematic and unsystematic risk. Seeing the fact that the stocks annual volatilities are calculated by using the

excel formula (=STDEV(Monthly Return) x SQRT(12)), it is now required to calculate the Beta. According to

the model, the Security Market Line (SML) equation, which relates the market risk premium, the stocks beta and

the risk-free rate with the companys expected return, must be verified for all stocks, assuming the following

formula: E(re)-rf=+e(E[rm]-rf). In that sense, by using historical data, it is possible to run a regression of the

excel add-in Data Analysis between the values for the excess return of the stock in relation to the risk-free rate (Y

Variable) and the values for the excess return of the market in relation to the risk-free rate (X Variable). All the

necessary data to compute risks was collected in the previous section of the report, except for the industry total

returns necessary to compare Exxon risk with its industry risk. Thus, the data set for total gross returns was

obtained in monthly percentage returns were calculated as before. Nonetheless, only 5 years of data were used, in

order to capture the more recent market circumstances.

After performing all the calculations and running the regressions (see Appendix 2 Table 1, Figure 1, Table 2,

Figure 2 for regression results and risk analysis), some final conclusions can be drawn on Exxon risk. An annual

volatility of 16.36% was obtained for Exxon stock, comparing with a markets annual volatility of 12.99%.

Therefore, it is possible to assume that the companys stock is riskier than the market proxy considered (S&P500

Index). Moreover, the stock has a beta of approximately 0.0427 (C.I. [-0.28; 0.39]) while its industry has a beta of

nearly -0.17 (C.I. [-0.57; 0.22]), which means that Exxon systematic risk is higher than that of the industry and that

their returns (both Exxon and the industry) vary less than those of the market (that, in this case, has a beta equal to

1). The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an

investment with lower volatility than the market, or a volatile investment whose price movements are not highly

2

correlated with the market. Negative betas are possible for investments that tend to go down when the market goes

up, and vice versa. In finance, systematic risk is measured by ^2_e^2_M, while unsystematic risk is

calculated by ^2_e-^2_e^2_M. After the calculations, it is possible to decompose Exxon risk in

systematic risk (0,003%) and unsystematic risk (2,675%).

Finally, one may argue on the performance of the company relative to the use of CAPM, using the estimated alpha

() of the regression as indicator. Since the estimated value of alpha for Exxon stock is positive 0.006, the asset

outperforms the expected return implied by the CAPM and is, therefore, undervalued. This is a conclusion that can

also be easily verified by representing the SML that illustrates the relation between expected returns and systematic

risk. Since investors only take additional risks if expected returns increase and a beta of 1 corresponds to the

expected return of the market proxy (risk-free asset), therefore it is possible to plot the upward-sloping line of the

SML, using historical data (see Appendix 3-Table 2, Table 3 for the Security Market Line graph). In fact, the

stock is positioned above the SML, confirming the fact that it is undervalued - for its level of systematic risk, the

return is expected to be very high, so investors will buy the stock and the price will gradually increase at the same

time that return decreases until equilibrium is reached.

Q3: Exxon Mobil Expected Return

In order to estimate, in the most reliable and accurate way, Exxon expected return (also called cost of equity), one

should apply CAPM widely known and used techniques. As already mentioned, according to this theory, all stocks

must lie on the SML. For that reason, by relying on a forward-looking (not historical) approach, its intended to

adjust SML parameters to solve for a Forward-Looking SML: the one Month US Treasury Bill was replaced by a

1,97% 10 years US Treasury Bill (for a medium term approach), the betas were those determined in the previous

section of this report (Exxon beta - e 0,043 - and Exxon industry beta - I -0,173 - to account for a

comparable approach, since considering the entire industry is more accurate than considering only a few

competitors) and the forward-looking expected return of the market (E[rM]) still had to be calculated.

In order to determine a forward-looking expected market return (S&P500 Index as the market proxy), its supposed

to collect the market value index and total yields between 2001 until 2014 (dividends in 2014 equal the product

between the market value index and the total yield of that year). Moreover, dividends were assumed to grow at

7.70% in the next five years and from 2013 to 2014 (assuming dividends will grow in a similar way, since there is

no data on this value), to after continue to grow at 8.14% forever (an estimate based on the average earnings

growth made available by the professor) and to be discounted by the expected market return. Thus, the forwardlooking expected market return was determined using the excel add-in Solver, so that the present value of future

cash flows (dividends), that is, the present value of the 5 years growing annuity and growing perpetuity, in 2014,

would equal the market value index in that same year, that is, $2058.9 (see Appendix 3-Table 1 for data on the

estimation of the forward-looking expected market return). This resulted in an expected market return of 13.12%.

Exxon cost of equity was, then, calculated by simply solving the SML equation with the previous values (see

Appendix 3-Table 2, Table 3 for the estimation of Exxon expected return). A forward-looking expected return of

2.45% was obtained using Exxon beta, a higher value than the 0.04% obtained using Exxon industry beta, since the

beta is also lower. These costs of equity are lower comparing with the return determined using historical data

(12.99% annual geometric average return). Therefore, it is possible to confirm what was previously stated on the

dangers of using historical data to estimate stocks expected returns. In fact, there is a difference of 10.54% and

12.94% in the cost of equity from using the historical data and not a forward-looking approach. This misleading

information may cause managers to not invest in a project that actually creates value (in this case, future cash flows

would be heavily discounted if an historical approach is followed) or deceive investors that buy companies stocks.

Nevertheless, it is worth to mention that betas were also obtained with historical, despite more recent, data and also

have an impact on the estimates of Exxon cost of equity.

Finally, despite being advisable the use of forward-looking approaches, it can be easily conclude that estimating

expected returns with different methods is important to allow financial and management agents to simulate

different scenarios, with more optimistic and pessimistic estimations, when evaluating investment opportunities.

Q4: Mean-variance Portfolio Choice

For what was previously stated, in this section of the report it is intended to conclude Exxon risk and return

analysis by combining other stocks with Exxon, determining the most efficient portfolios, in an attempt to

approach this study to what actually happens in the financial markets. In addition to the data previously collected

on Exxon and on one Month US Treasury Bills monthly returns, data on Apple Inc. (AAPL)s and on Nike inc.

(NKE)s monthly returns was gathered (using the same total return index available in Bloomberg), so that a

minimum matching sample period of over 10 years was ensured. Excluding the risk-free asset that has a 0 covariance with all companies, annualized co-variances between companies were obtained. Exxon is a considerably

stable company, ranked in S&P 500 as AAA level company. Given the company rating, it is expected that the

company has low risk exposure. In order to assess this information the companies monthly rates of return were

used to compute the annual arithmetic average returns and volatilities (standard deviations). The results were 67%

for volatility and 15.1% for stocks' arithmetic average return. In order for a portfolio be profitable is important to

combine as much stocks from different industries as possible in one portfolio so that risk is eliminated. Even

though diversification benefits always exist, the amount of eliminated risk depends on the degree to which stocks

are exposed to common risks and their returns move together (measured by co-variances and correlation).

Therefore we chose companies from different industries and with different behaviors (regarding the volatility and

arithmetic average return), to have a diversified portfolio.

The companies selected to include the portfolio were Nike (22.63% for arithmetic average return and 35.29% for

volatility) and Apple. (28.49% for arithmetic average return and 46.47% for volatility). Companies monthly rates

of return and annual arithmetic average returns and volatilities (standard deviations) were computed according to

the procedures described in the second section of this report, except the risk-free assets volatility that was set

equal to 0% (see Appendix - Table 1 for stocks annual arithmetic average returns, volatilities and co-variances).

In this report, three different sets of stocks are analyzed: Portfolios I (Exxon & Nike), Portfolios II (Exxon &

Apple) and Portfolios III (Exxon, Apple and Nike), (see Appendix - Table 2; 3; 4). Since the correlation and the

co-variances between stocks returns are positive, one expects diversification benefits to exist.

Mean-variance frontiers are quite helpful in decisions regarding portfolios given that it establishes a relation

between the returns and risk. Through the use of this tool is possible to adjust the weight of each stock in the

investment, in order to achieve the most desirable ratio risk-revenue. The most desirable condition to an investor is

to have the highest revenue at the smallest risk. If a portfolio combines different stocks, its possible to associate

them in order to achieve this scenario. Therefore the most diversified (more stock thus more relation options)

best scenarios are achievable. In our work, we could conclude that the portfolio with more stocks (Portfolio III),

actually present the most benefits of the diversification. Portfolio III (see Appendix 4 Figure 1) is the one

located to the left, meaning that is possible to obtain higher expected returns for any level of risk, comparing

with the other two frontiers. It is also presented the frontiers when the investor cannot take a short position, and we

can verify that if the investor cant borrow from one side to invest on the other (expanding his horizons), the

mean variance frontier gets flatter (see Appendix 4- Table 2). If we were to compare our portfolio option to an

equally weighted portfolio, as a matter of fact, the mean variance frontier of portfolio III already has a point with

similar characteristics (weights of 33,35%; 34,28%; 32,37%, consult Appendix 4- Table 4). Since this line has the

best options to invest, this may mean that an equally weighted portfolio is close to the portfolio best options

(depending on the risk sensibility of the investor). Additionally this could mean that the companies do not differ

4

that much between them (the same portion is a good option) or compensate each other weaknesses. Summing

up, since we have already a point in the mean variance frontier similar to the equally weighted option, we can

assume that it may be a good option for the less risk adverse investors.

Short-selling (transaction in which you sell a stock today that you do not own, with the obligation to buy it back in

the future) involves a short position (negative investment) in a stock and on the other hand a long position in

another stock (positive investment). This opens the opportunity given that is possible to sell a less profitable

stock to purchase a more rentable one. This process is profitable as long as the investment is applied in a stock with

higher expected return. Hence, stocks with lower expected return are the ones in which investors hold a short

position, to invest in other of higher return (in this case, Exxon stock is the first to be short-sold). Portfolios

with

more than two stocks and with no short-selling will result in exactly the same expected returns and volatilities as if

short-selling was allowed for expected returns between the lower and the higher expected returns of the individual

stocks (you can reduce the investment in the one with lowest return and look for other options). This happens

because within this range short-selling is not necessary.1

All the portfolios with an expected return lower than the one of the minimum variance portfolio are

inefficient. Reversely, all the portfolios that have an expected return equal or higher than the one of the

minimum variance portfolio are efficient, given that for their level of risk it is not possible to earn higher returns

(See Appendix 4 - Figure 3). Every investment has its risks, and usually with higher risks comes a higher return.

The choice of a portfolio depends on investors risk susceptibility. So, investors that are completely risk-averse

choose the minimum variance portfolio of the mean-variance frontier and risk-loving investors opt for an efficient

portfolio in which their risk preferences are satisfied (ultimately, risk-loving investors may even short-sale).2

Considering a risk free asset is absolutely important to consider the Capital Market Line. By combining a riskfree asset with a portfolio on the efficient frontier, it is possible to achieve portfolios even more lucrative than the

ones in the efficient frontier.3 To achieve the best solution, the risk free asset should be tangent to the portfolio (See

Appendix 4 - Figure 3) and thus the Sharpe Ratio should as steepest as possible. From what have been mentioned

and the (See Appendix 4 - Figure 3), one can conclude that investors are in a best position if they invest-free

security with risky investments, since portfolios with the maximum expected returns, given any level of risk. The

efficient frontier turns to be the steepest line that links the risk-free and the risky investments (and no longer the

portfolios above the minimum variance portfolio) and all the previous mean-variance frontiers become

inefficient. Given the special scenario that a risk free asset provides, with the Capital Market Line, one can

assume that is always the best option given that it provides highest return per unit of volatility of any portfolio

available.

https://books.google.pt/books?id=pwXWZzxXxfwC&pg=PA207&lpg=PA207&dq=which+portfolios+are+efficient+for+short+selling&sour

ce=bl&ots=a7O_rdWf21&sig=9C8gqof1c0x0lwv0YfqHl3HvAU&hl=en&sa=X&ei=ykUMVcWVLIO1Ue3rgJgB&ved=0CCwQ6AEwAA#v=onepage&q=which%20portfolios%20are%2

0efficient%20for%20short%20selling&f=false

2

http://www.investinganswers.com/

3

http://riskencyclopedia.com/articles/capital_market_line/

Appendix:

Appendix 1 Question 1

Table 1: Exxon Mobil Corp. arithmetic and geometric average return and volatility

ARITHMETIC AVERAGE

GEOMETRIC AVERAGE

RETURN

RETURN

VOLATILITY

MONTHLY

1,18%

1,07%

5,00%

ANNUAL

14,21%

12,79%

17,32%

Table 2: S&P500 Index arithmetic and geometric average return and volatility

MONTHLY

ANNUAL

S&P500 INDEX

ARITHMETIC AVERAGE

GEOMETRIC AVERAGE

RETURN

RETURN

1,00%

0,90%

11,98%

10,83%

VOLATILITY

4,36%

15,10%

Table 3: 1 Month Treasury-bill arithmetic and geometric average return and volatility

MONTHLY

ANNUAL

1 MONTH TREASURY-BILLS

ARITHMETIC AVERAGE

GEOMETRIC AVERAGE

RETURN

RETURN

0,37%

0,37%

4,48%

4,48%

VOLATILITY

0,29%

0,99%

08-08-1980

12-12-1981

04-04-1983

08-08-1984

12-12-1985

04-04-1987

08-08-1988

12-12-1989

04-04-1991

08-08-1992

12-12-1993

04-04-1995

08-08-1996

12-12-1997

04-04-1999

08-08-2000

12-12-2001

04-04-2003

08-08-2004

12-12-2005

04-04-2007

08-08-2008

12-12-2009

04-04-2011

08-08-2012

12-12-2013

Cumulative Return

Figure 1: Cumulative Returns

Cumulative Return

10000,00%

9000,00%

8000,00%

7000,00%

6000,00%

5000,00%

4000,00%

3000,00%

2000,00%

1000,00%

0,00%

Exxon

T-Bill

S&P500

Data

Appendix 2 Question 2

Table 1: Exxons Risk Analysis

SUMRIO DOS RESULTADOS - EXXON MOBIL

Estatstica de regresso

R mltiplo

0,03396572

Quadrado de R

Quadrado de R

ajust.

Erro-padro

Observaes

Yearly Volatility Stock

Montly Volatility

Market

Yearly Volatility

Market

Systematic Risk

Systematic Variance

Unsystematic Risk

0,00115367

0,015775929

0,047608937

61

4,725%

16,366%

3,752%

12,999%

0,003%

2,679%

2,675%

ANOVA

Regresso

Residual

Total

gl

1

59

60

SQ

MQ

0,000154459 0,0001

0,133730041 0,0022

0,133884499

F

0,068145157

F de

significncia

0,794965

Coeficientes

0,006170218

Erro-padro Stat t

0,0063791 0,9672

valor P

0,337364788

95% inferior

-0,006594

0,794965879

-0,284970

95%

superior

0,01893

0,37047

9

Figure 1: Exxons Risk Analysis

ExxonMobil Regression

15,00%

10,00%

y = 0,0428x + 0,0062

R = 0,0012

E(re)-rf

5,00%

-10,00%

-5,00%

0,00%

0,00%

5,00%

-5,00%

-10,00%

-15,00%

(E(rM)-rf)

10,00%

15,00%

Table 2: Industrys Risk Analysis

Industry Regression

SUMRIO DOS RESULTADOS -INDUSTRY

Estatstica de

regresso

R mltiplo

0,11173112

Quadrado de R

Quadrado de R

ajust.

Erro-padro

Observaes

0,01248384

Montly Volatility

Industry

Yearly Volatility

Industry

0,05802884

0,20101782

-0,0042537

0,05815213

61

ANOVA

gl

Regresso

Residual

Total

1

59

60

SQ

MQ

0,0025222 0,00252

0,1995185 0,00338

0,2020408

Coeficiente

s

0,0104666

-0,1727701

Erropadro

Stat t

0,0077917 1,34329

0,2000509 -0,8636

10

F

0,74585796

F de

significnci

a

0,39128819

valor P

95% inferior

0,18432228 -0,0051246

0,391288199 -0,5730712

95%

superior

0,026057

0,227530

Industry Regression

25,00%

20,00%

y = -0,1728x + 0,0105

R = 0,0125

15,00%

10,00%

E(rI)-rf

5,00%

-10,00%

-5,00%

0,00%

0,00%

-5,00%

5,00%

10,00%

15,00%

-10,00%

-15,00%

-20,00%

(E(rM)-rf)

SML

16,000%

y = 0,011x + 3E-05

14,000%

12,000%

SML

10,000%

E(r)

8,000%

Expected Value of Stock

6,000%

4,000%

2,000%

-0,4

0,000%

-0,2

-2,000% 0

-4,000%

0,2

0,4

0,6

11

0,8

1,2

Appendix 3 Question 3

Table 1: Estimating Forward Looking Expected Return

Forward Looking Expected Return for Market

S&P500

Market Growth rate ( Estimation for 5

years)

Market Growth rate (Based on Past Future Growth)

Risk free rate (10 Years treasury Bill)

DIV 2020 (2014 + 5 + 1 = 2020)

PV OF THE MARKET VALUE IN 2013

7,70%

8,14%

1,97%

108,23

169,59

2.058,90

Historical Beta's

Exxon's Beta (e)

E(re)-rf=+e(E(rM)-rf)

0,042754415

2,45%

Exxon's Beta (e)

-0,172770156

E(re)-rf=+e(E(rM)-rf)

12

0,04%

Appendix 4 Question 4

Figure 1: Mean-Variance Frontiers (With Short-Selling)

40,00%

35,00%

30,00%

25,00%

20,00%

15,00%

10,00%

5,00%

0,00%

0,00%

10,00%

20,00%

30,00%

Portofolio I

40,00%

50,00%

Portofolio II

13

60,00%

70,00%

Portofolio III

40,00%

Long position on Nike and Apple

and Short position on Exxon

35,00%

30,00%

25,00%

Efficient Portfolios

20,00%

15,00%

10,00%

5,00%

0,00%

0,00%

position on Nike and Apple

10,00%

20,00%

Inefficient Portfolios

30,00%

40,00%

Portofolio III

50,00%

60,00%

40,00%

Borrowing at the Risk-Free

Interest Rate to Invest on

Risky Stocks

35,00%

and Short position on Exxon

30,00%

25,00%

20,00%

Tangency point

15,00%

position on Nike and Apple

10,00%

3.94

5,00%

0,00%

0,00%

10,00%

20,00%

30,00%

Portofolio III

40,00%

50,00%

14

60,00%

70,00%

Table 1: Expected Return, volatility, and covariance

Exxon

Nike

Apple

Risk free asset

Stocks' Arithmetic

Average Return

15,055%

22,629%

28,489%

3,943%

Covariance

Stocks Volatility

16,676%

35,291%

46,470%

0,000%

15

EXXON

2,774%

1,005%

1,565%

0,000%

Nike

1,005%

12,422%

2,889%

0,000%

Apple

1,57%

2,89%

21,54%

0,00%

Table 2: Portfolio I (Exxon & Nike)

Investment

on Exxon's

Stock

-20,00%

-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

50,00%

55,00%

60,00%

65,00%

70,00%

75,00%

80,00%

81,19%

85,00%

86,59%

90,00%

95,00%

100,00%

105,00%

110,00%

115,00%

120,00%

Investment on

Nike's Stock

Portfolio Expected

Return

Portfolio

Volatility

120,00%

115,00%

110,00%

105,00%

100,00%

95,00%

90,00%

85,00%

80,00%

75,00%

70,00%

65,00%

60,00%

55,00%

50,00%

45,00%

40,00%

35,00%

30,00%

25,00%

20,00%

18,81%

15,00%

13,41%

10,00%

5,00%

0,00%

-5,00%

-10,00%

-15,00%

-20,00%

24,14%

23,76%

23,39%

23,01%

22,63%

22,25%

21,87%

21,49%

21,11%

20,74%

20,36%

19,98%

19,60%

19,22%

18,84%

18,46%

18,08%

17,71%

17,33%

16,95%

16,57%

16,48%

16,19%

16,07%

15,81%

15,43%

15,06%

14,68%

14,30%

13,92%

13,54%

41,91%

40,23%

38,57%

36,92%

35,29%

33,68%

32,09%

30,52%

28,99%

27,49%

26,03%

24,62%

23,26%

21,97%

20,76%

19,65%

18,64%

17,77%

17,05%

16,49%

16,12%

16,06%

15,96%

15,94%

15,99%

16,24%

16,68%

17,30%

18,08%

19,00%

20,05%

16

Table 3: Portfolio II (Exxon & Apple)

Investment on

Exxon's Stock

-20,00%

-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

50,00%

55,00%

60,00%

65,00%

70,00%

75,00%

80,00%

81,19%

85,00%

90,00%

94,28%

95,00%

100,00%

105,00%

110,00%

115,00%

120,00%

Investment on

Portfolio Expected

Apple's Stock

Return

120,00%

115,00%

110,00%

105,00%

100,00%

95,00%

90,00%

85,00%

80,00%

75,00%

70,00%

65,00%

60,00%

55,00%

50,00%

45,00%

40,00%

35,00%

30,00%

25,00%

20,00%

18,81%

15,00%

10,00%

5,72%

5,00%

0,00%

-5,00%

-10,00%

-15,00%

-20,00%

31,18%

30,50%

29,83%

29,16%

28,49%

27,82%

27,15%

26,47%

25,80%

25,13%

24,46%

23,79%

23,12%

22,44%

21,77%

21,10%

20,43%

19,76%

19,09%

18,41%

17,74%

17,58%

17,07%

16,40%

15,82%

15,73%

15,06%

14,38%

13,71%

13,04%

12,37%

17

Portfolio

Volatility

55,19%

52,99%

50,81%

48,63%

46,47%

44,32%

42,19%

40,08%

37,99%

35,93%

33,90%

31,90%

29,95%

28,05%

26,22%

24,47%

22,82%

21,29%

19,91%

18,71%

17,73%

17,54%

17,01%

16,58%

16,47%

16,47%

16,68%

17,19%

17,99%

19,04%

20,29%

Table 4: Portfolio III (Exxon, Nike, Apple)

Investment

on Exxon's

Stock

235,20%

216,85%

198,50%

180,15%

161,80%

143,45%

125,10%

115,93%

106,75%

102,16%

97,58%

92,99%

88,40%

83,76%

79,23%

74,64%

70,05%

65,46%

60,88%

56,29%

51,70%

47,11%

42,53%

37,94%

33,35%

28,76%

24,18%

19,59%

15,00%

10,41%

5,83%

1,24%

-3,35%

-7,93%

-12,52%

-21,70%

Investment on

Nike's Stock

-53,01%

-45,08%

-37,14%

-29,21%

-21,27%

-13,34%

-5,40%

-1,43%

2,54%

4,52%

6,50%

8,49%

10,47%

12,48%

14,44%

16,42%

18,41%

20,39%

22,37%

24,36%

26,34%

28,32%

30,31%

32,29%

34,28%

36,26%

38,24%

40,23%

42,21%

44,20%

46,18%

48,16%

50,15%

52,12%

54,11%

58,08%

Portfolio

Investment on

Total Investment

Expected

Apple's Stock

Return

-82,19%

100,00%

0,00%

-71,78%

100,00%

2,00%

-61,36%

100,00%

4,00%

-50,95%

100,00%

6,00%

-40,53%

100,00%

8,00%

-30,12%

100,00%

10,00%

-19,70%

100,00%

12,00%

-14,49%

100,00%

13,00%

-9,29%

100,00%

14,00%

-6,68%

100,00%

14,50%

-4,08%

100,00%

15,00%

-1,48%

100,00%

15,50%

1,13%

100,00%

16,00%

3,76%

100,00%

16,51%

6,34%

100,00%

17,00%

8,94%

100,00%

17,50%

11,54%

100,00%

18,00%

14,15%

100,00%

18,50%

16,75%

100,00%

19,00%

19,35%

100,00%

19,50%

21,96%

100,00%

20,00%

24,56%

100,00%

20,50%

27,16%

100,00%

21,00%

29,77%

100,00%

21,50%

32,37%

100,00%

22,00%

34,98%

100,00%

22,50%

37,58%

100,00%

23,00%

40,18%

100,00%

23,50%

42,79%

100,00%

24,00%

45,39%

100,00%

24,50%

47,99%

100,00%

25,00%

50,60%

100,00%

25,50%

53,20%

100,00%

26,00%

55,81%

100,00%

26,50%

58,41%

100,00%

27,00%

63,62%

100,00%

28,00%

18

Portfolio Volatility

52,37%

46,65%

41,02%

35,53%

30,24%

25,29%

20,93%

19,09%

17,59%

16,99%

16,50%

16,15%

15,93%

15,85%

15,91%

16,12%

16,46%

16,93%

17,52%

18,22%

19,01%

19,88%

20,83%

21,84%

22,90%

24,01%

25,17%

26,36%

27,58%

28,83%

30,10%

31,40%

32,71%

34,04%

35,38%

38,11%

Return

Constrain

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

13,00%

14,00%

14,50%

15,00%

15,50%

16,00%

17,00%

17,50%

18,00%

18,50%

19,00%

19,50%

20,00%

20,50%

21,00%

21,50%

22,00%

22,50%

23,00%

23,50%

24,00%

24,50%

25,00%

25,50%

26,00%

26,50%

27,00%

28,00%

-40,05%

-58,40%

-76,75%

-95,10%

33,33%

66,02%

73,95%

81,89%

89,82%

33,33%

74,03%

84,45%

94,86%

105,28%

33,33%

100,00%

100,00%

100,00%

100,00%

100,00%

19

30,00%

32,00%

34,00%

36,00%

22,06%

43,67%

49,35%

55,11%

60,92%

23,03%

30,00%

32,00%

34,00%

36,00%

22,00%

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