What are the return and risk characteristics of the ProIndex fund, calculating the statistics as outlined in case Exhibit 4?
What are the return and risk characteristics of the ProValue fund, calculating the statistics as outlined in case Exhibit 4? Please use the full data set in case Exhibit 6 (for ProValue Fund) and Exhibit 7 (for S&P 400) found in the student spreadsheet and use S&P 400 Index as the benchmark. Please notice that for the last day of each quarter, TAM added additional funds and purchased additional securities. The additions need to be subtracted from the ending value for the day before the day’s returns are calculated.
What are the expected return and risk for the ProValue fund, based on the expected annual returns for each individual stock in Exhibit 10? Please compare the expected return and risk with current weights shown in Exhibit 8 and those with optimized weights shown in Exhibit 10? How should TAM adjust the portfolio, if at all?
Notice that there are negative weights in the optimized weights in Exhibit 10, which means that TAM has to take short positions to optimize the portfolio. What if the college endowment would not accept short position? An extra table (Appendix Table 1b) with Non-negative optimized security weights is available on HuskyCT, where the security weights are calculated to minimize portfolio variance for each given portfolio expected return and the security weights have to be non-negative.
What would the risk-return profiles for the college endowment be, assuming different levels of investment in the ProValue fund ($5 million, $10 million, and 15 million)?
