Start

End
Frequency

Portfolio Return =

6/30/1995
6/30/1999
Monthly Share Prices

Code
AGL Price
6/30/1995
7/30/1995
8/30/1995
9/30/1995
10/30/1995
11/30/1995
12/30/1995
1/30/1996
2/29/1996
3/30/1996
4/30/1996
5/30/1996
6/30/1996
7/30/1996
8/30/1996
9/30/1996
10/30/1996
11/30/1996
12/30/1996
1/30/1997
2/28/1997
3/30/1997
4/30/1997
5/30/1997
6/30/1997
7/30/1997
8/30/1997
9/30/1997
10/30/1997
11/30/1997
12/30/1997
1/30/1998
2/28/1998
3/30/1998
4/30/1998
5/30/1998
6/30/1998
7/30/1998
8/30/1998
9/30/1998
10/30/1998
11/30/1998
12/30/1998
1/30/1999
2/28/1999
3/30/1999
4/30/1999
5/30/1999
6/30/1999

AGL return
(%)
ANZ
4.47
4.54
4.48
4.6
4.55
4.73
5.05
5.35
5.3
5.4
5.3
5.17
5.29
5.47
6.1
6.8
6.92
6.85
7.16
6.98
7.37
7.25
7.35
7.83
7.8
8.4
8.57
9.38
9.5
9.85
10.7
11.19
11.7
12.25
11.41
11.21
10.1
10.9
9.92
11.62
11.51
11.84
11.75
11.15
10.56
11.25
10.7
9.73
9.19

0.016
-0.013
0.027
-0.011
0.040
0.068
0.059
-0.009
0.019
-0.019
-0.025
0.023
0.034
0.115
0.115
0.018
-0.010
0.045
-0.025
0.056
-0.016
0.014
0.065
-0.004
0.077
0.020
0.095
0.013
0.037
0.086
0.046
0.046
0.047
-0.069
-0.018
-0.099
0.079
-0.090
0.171
-0.009
0.029
-0.008
-0.051
-0.053
0.065
-0.049
-0.091
-0.055

ANZ
return (%) BHP
5
5.01
5.4
5.67
5.5
6
6.31
6.81
6.43
6.12
6.08
5.76
6.02
6.4
6.61
7.23
7.37
8.07
7.93
8.04
8.04
8.08
8.19
8.99
9.9
10.73
9.78
11.28
9.92
10.04
10.14
9.86
10.1
10.1
10.7
11.34
11.14
10.67
8.83
9.02
9.15
10.51
10.68
10.47
10.4
11.45
11.97
11.32
11.11

0.002
0.078
0.050
-0.030
0.091
0.052
0.079
-0.056
-0.048
-0.007
-0.053
0.045
0.063
0.033
0.094
0.019
0.095
-0.017
0.014
0.000
0.005
0.014
0.098
0.101
0.084
-0.089
0.153
-0.121
0.012
0.010
-0.028
0.024
0.000
0.059
0.060
-0.018
-0.042
-0.172
0.022
0.014
0.149
0.016
-0.020
-0.007
0.101
0.045
-0.054
-0.019

BHP
return (%)
17.32
19.34
19.3
18.24
17.78
18.15
18.87
18.95
18.95
18.22
19.59
18.9
17.57
17.03
17.22
16.2
16.75
18.02
17.92
17.98
17.05
17
18.08
18.86
19.48
18.24
17.08
16.08
14.1
13.43
14.25
14.43
14.5
15.44
15
13.68
13.65
13.35
12.06
12.08
13.6
12.65
12.02
11.68
12.09
13.45
17.08
15.48
17.5

0.117
-0.002
-0.055
-0.025
0.021
0.040
0.004
0.000
-0.039
0.075
-0.035
-0.070
-0.031
0.011
-0.059
0.034
0.076
-0.006
0.003
-0.052
-0.003
0.064
0.043
0.033
-0.064
-0.064
-0.059
-0.123
-0.048
0.061
0.013
0.005
0.065
-0.028
-0.088
-0.002
-0.022
-0.097
0.002
0.126
-0.070
-0.050
-0.028
0.035
0.112
0.270
-0.094
0.130

Historical mean return

Historical variance
Historical std dev
Historical Coeff of variation
Expected Return
Variance
Standard Deviation
Coefficient of variation

0.017
0.003
0.056
3.37

0.019
0.004
0.064
3.40

0.003
0.005
0.072
26.96

0.016679
0.003157
0.056186
3.368665

0.018823
0.004087
0.063929
3.396416

0.002653
0.005113
0.071505
26.957608

Step 1: (a) Compute historical return distribution (mean, variance...). your own belief/analysis about
(b) Using these historical statistics, together with your own belief/analysis, come up with estimates of the mean
(c) Variance/covariance can be taken from historical variance/covariance

Portfolio Return =

W E ( R
i 1

Brambles
13.34
13.48
13.38
14.6
13.96
14.7
15
15.85
16.3
16.88
17.45
17.6
17.68
17.8
18.9
20.5
20.9
21.5
24.55
22.3
21.7
20.97
23.2
23.65
26.19
27.8
26.8
28.75
27.34
28.01
30.45
29.7
30.8
31.45
31.61
32.4
31.69
34.78
34.6
36.43
35.09
39.01
39.75
43.25
41
40.08
44.4
40.79
39.8

News
Stock Mkt
Brambles
Delta Gold
Corp
All Ord
Index
return (%) Delta Gold return (%) News Corp return (%) Index
return (%)
2.62
7.86
2012.7
0.010
2.65
0.011
7.85
-0.001
2117.5
0.052
-0.007
2.87
0.083
7.64
-0.027
2131.3
0.007
0.091
2.92
0.017
7.36
-0.037
2126.6
-0.002
-0.044
2.82
-0.034
6.62
-0.101
2063.3
-0.030
0.053
3.3
0.170
7.06
0.066
2147.6
0.041
0.020
3.26
-0.012
7.18
0.017
2188.5
0.019
0.057
3.65
0.120
7.25
0.010
2261
0.033
0.028
3.3
-0.096
7.44
0.026
2263.7
0.001
0.036
3.18
-0.036
7.49
0.007
2198.1
-0.029
0.034
3.18
0.000
7.46
-0.004
2285.7
0.040
0.009
3.4
0.069
7.03
-0.058
2235.9
-0.022
0.005
3.25
-0.044
7.21
0.026
2207.6
-0.013
0.007
3.09
-0.049
6.5
-0.098
2147.4
-0.027
0.062
3.02
-0.023
6.74
0.037
2230.1
0.039
0.085
2.8
-0.073
6.63
-0.016
2249.9
0.009
0.020
2.4
-0.143
7.18
0.083
2320.7
0.031
0.029
2.35
-0.021
6.54
-0.089
2361.4
0.018
0.142
2.36
0.004
6.64
0.015
2404.8
0.018
-0.092
2.19
-0.072
6.64
0.000
2406.6
0.001
-0.027
2.15
-0.018
6.86
0.033
2422.9
0.007
-0.034
1.88
-0.126
5.95
-0.133
2396.3
-0.011
0.106
2.17
0.154
5.91
-0.007
2453.9
0.024
0.019
2.17
0.000
5.83
-0.014
2574.9
0.049
0.107
2.21
0.018
6.35
0.089
2693.1
0.046
0.061
1.79
-0.190
6.17
-0.028
2695.4
0.001
-0.036
1.68
-0.061
6.13
-0.006
2548.8
-0.054
0.073
1.65
-0.018
7.08
0.155
2723.7
0.069
-0.049
1.2
-0.273
6.81
-0.038
2429.5
-0.108
0.025
1.3
0.083
7.82
0.148
2439.6
0.004
0.087
1.62
0.246
8.47
0.083
2579.5
0.057
-0.025
1.94
0.198
9.19
0.085
2611.5
0.012
0.037
1.89
-0.026
9.35
0.017
2630.3
0.007
0.021
1.98
0.048
9.97
0.066
2688.5
0.022
0.005
2.26
0.141
10.28
0.031
2712.9
0.009
0.025
1.9
-0.159
9.85
-0.042
2655.1
-0.021
-0.022
1.98
0.042
13.18
0.338
2620.6
-0.013
0.098
1.92
-0.030
12
-0.090
2661.9
0.016
-0.005
1.61
-0.161
10.69
-0.109
2423.7
-0.089
0.053
2.36
0.466
10.88
0.018
2497.7
0.031
-0.037
2.62
0.110
10.93
0.005
2548.1
0.020
0.112
2.38
-0.092
11.17
0.022
2669.7
0.048
0.019
2.48
0.042
10.78
-0.035
2697
0.010
0.088
2.47
-0.004
11.52
0.069
2751.4
0.020
-0.052
2.38
-0.036
11.3
-0.019
2742.2
-0.003
-0.022
2.23
-0.063
11.67
0.033
2843.3
0.037
0.108
2.35
0.054
12.66
0.085
3016.3
0.061
-0.081
2.24
-0.047
12.6
-0.005
2823.9
-0.064
-0.024
2.15
-0.040
12.89
0.023
2886.1
0.022

belief/analysis about
me up with estimates of the mean

0.024
0.003
0.054
2.20

0.003
0.014
0.120
44.42

0.013
0.006
0.077
5.88

0.008
0.001
0.036
4.38

0.024439
0.002878
0.053645
2.195021

0.002705
0.014435
0.120146
44.423696

0.013149
0.005973
0.077283
5.877483

0.008195
0.001289
0.035908
4.381713

10yr
Govt.bond
(%)
8.78
9.18
9.03
8.6
8.4
8.41
8.33
8.06
8.71
8.91
8.95
8.76
8.96
8.51
7.8
7.95
7.52
7.09
7.36
7.44
7.53
8.02
7.82
7.7
7.04
6.56
6.72
6.17
6.27
5.99
6.08
5.8
5.83
5.76
5.74
5.58
5.67
5.53
5.62
5.23
5
5.19
4.8
5.16
5.37
5.44
5.28
5.92
6.03

0.0073
0.0077
0.0075
0.0072
0.0070
0.0070
0.0069
0.0067
0.0073
0.0074
0.0075
0.0073
0.0075
0.0071
0.0065
0.0066
0.0063
0.0059
0.0061
0.0062
0.0063
0.0067
0.0065
0.0064
0.0059
0.0055
0.0056
0.0051
0.0052
0.0050
0.0051
0.0048
0.0049
0.0048
0.0048
0.0047
0.0047
0.0046
0.0047
0.0044
0.0042
0.0043
0.0040
0.0043
0.0045
0.0045
0.0044
0.0049
0.0050

0.006
0.000
0.001
0.20
0.005778
0.000001
0.001130
0.195524

Step Two: Calculate the variance-covariance matrix and/or correlation matrix,

Go to Tools and click on Data Analysis, then look for Covariance (or correlation). Click on the Covariance, then highlight all columns (A to F).
See covariance results in cells (H10:N16)
Correlation matrix can be found using a similar process as described above

AGL return ANZ

BHP
Brambles
Delta Gold
News Corp
(%)
return (%) return (%) return (%)
return (%)
return (%)
0.016
0.002
0.117
0.010
0.011
-0.001
-0.013
0.078
-0.002
-0.007
0.083
-0.027
0.027
0.050
-0.055
0.091
0.017
-0.037
-0.011
-0.030
-0.025
-0.044
-0.034
-0.101
0.040
0.091
0.021
0.053
0.170
0.066
0.068
0.052
0.040
0.020
-0.012
0.017
0.059
0.079
0.004
0.057
0.120
0.010
-0.009
-0.056
0.000
0.028
-0.096
0.026
0.019
-0.048
-0.039
0.036
-0.036
0.007
-0.019
-0.007
0.075
0.034
0.000
-0.004
-0.025
-0.053
-0.035
0.009
0.069
-0.058
0.023
0.045
-0.070
0.005
-0.044
0.026
0.034
0.063
-0.031
0.007
-0.049
-0.098
0.115
0.033
0.011
0.062
-0.023
0.037
0.115
0.094
-0.059
0.085
-0.073
-0.016
0.018
0.019
0.034
0.020
-0.143
0.083
-0.010
0.095
0.076
0.029
-0.021
-0.089
0.045
-0.017
-0.006
0.142
0.004
0.015
-0.025
0.014
0.003
-0.092
-0.072
0.000
0.056
0.000
-0.052
-0.027
-0.018
0.033
-0.016
0.005
-0.003
-0.034
-0.126
-0.133
0.014
0.014
0.064
0.106
0.154
-0.007
0.065
0.098
0.043
0.019
0.000
-0.014
-0.004
0.101
0.033
0.107
0.018
0.089
0.077
0.084
-0.064
0.061
-0.190
-0.028
0.020
-0.089
-0.064
-0.036
-0.061
-0.006
0.095
0.153
-0.059
0.073
-0.018
0.155

Variance-Covariance Matrix

AGL
0.003156836
0.00140478
-0.000202865
0.001246791
0.00188586
-6.16053E-06

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

ANZ
0.004086924
0.000899338
0.001341613
0.001275517
0.000891601

WiW j COV (i, j ) OR

2
P

i 1 j 1
n

Wi
2
P

i 1

2
i

W W COV (i, j)

i 1,i j j 1

0.013
0.037
0.086
0.046
0.046
0.047
-0.069
-0.018
-0.099
0.079
-0.090
0.171
-0.009
0.029
-0.008
-0.051
-0.053
0.065
-0.049
-0.091
-0.055

-0.121
0.012
0.010
-0.028
0.024
0.000
0.059
0.060
-0.018
-0.042
-0.172
0.022
0.014
0.149
0.016
-0.020
-0.007
0.101
0.045
-0.054
-0.019

-0.123
-0.048
0.061
0.013
0.005
0.065
-0.028
-0.088
-0.002
-0.022
-0.097
0.002
0.126
-0.070
-0.050
-0.028
0.035
0.112
0.270
-0.094
0.130

-0.049
0.025
0.087
-0.025
0.037
0.021
0.005
0.025
-0.022
0.098
-0.005
0.053
-0.037
0.112
0.019
0.088
-0.052
-0.022
0.108
-0.081
-0.024

-0.273
0.083
0.246
0.198
-0.026
0.048
0.141
-0.159
0.042
-0.030
-0.161
0.466
0.110
-0.092
0.042
-0.004
-0.036
-0.063
0.054
-0.047
-0.040

-0.038
0.148
0.083
0.085
0.017
0.066
0.031
-0.042
0.338
-0.090
-0.109
0.018
0.005
0.022
-0.035
0.069
-0.019
0.033
0.085
-0.005
0.023

ce-Covariance Matrix

BHP

0.005112975
0.000453413
0.002804945
0.001034234

BRAMBLES

0.002877751
0.001458925
0.00058726

DELTA

0.014435177
0.002793552

NEWS CORP

0.005972717

Share Names

Weights
(W)

Expected
Return (ER)

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP
0

Step 3: Determine the expected return and

standard deviation for the portfolio

ER * W
Variance (V)
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

(W^2)*V
0.00000%
0.00000%
0.00000%
0.00000%
0.00000%
0.00000%
0.00000%

n
E(R P ) W i R i
i

Variance-Covariance Matrix

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

AGL
0.003157
0.001405
-0.0002
0.001247
0.001886
-6.2E-06

ANZ

BHP

0.004086924
0.000899338
0.001341613
0.001275517
0.000891601

BRAMBLES

0.005112975
0.000453413
0.002804945
0.001034234

0.002877751
0.001458925
0.00058726

DELTA

0.014435177
0.002793552

15 COVARIANCE RELATIONSHIPS
AGL
Weight
AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

0
0
0
0
0
0

ANZ

BHP

BRAMBLES

0
0
0
0
0

0
0
0
0

0
0
0

0
0

Portfolio
Variance

Portfolio Std.
Deviation

0.00000%

WiW j COV (i, j ) OR

2
P

i 1 j 1
n

Wi
2
P

i 1

2
i

W W COV (i, j)

i 1,i j j 1

NEWS CORP

0.005972717

DELTA
0

NEWS CORP
0

0
0

= SUM =

Step Four: Set the solver Constraints

(i): The Target Cell (Is the cell which you wish to minimise or maximise)
(ii): Changing Cells (is the cells that contain the weights you wish SOLVER to find)
(iii): Subject to the Constraints (1) no short selling (2) invest 100% of wealth (3) The target monthly return

target monthly return

Share Names
AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

Weights
Expected
(W)
Return (ER)
0.020811
0.0167
0
0.0188
0.818142
0.0027
0
0.0244
0.156527
0.0027
0.00452
0.0131
1.000000

ER * W
Variance (V)
0.0003
0.0032
0.0000
0.0041
0.0022
0.0051
0.0000
0.0029
0.0004
0.0144
0.0001
0.0060
0.003000

(W^2)*V
0.0000
0.0000
0.0034
0.0000
0.0004
0.0000
0.003778

SOLVER FINDS THESE WEIGHTS

n
E(R P ) W i R i
i

Step Five: Run solver

Variance-Covariance Matrix

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

AGL
0.003157
0.001405
-0.0002
0.001247
0.001886
-6.2E-06

ANZ
0.004086924
0.000899338
0.001341613
0.001275517
0.000891601

BHP

BRAMBLES

0.005112975
0.000453413
0.002804945
0.001034234

0.002877751
0.001458925
0.00058726

DELTA

0.014435177
0.002793552

COVARIANCE

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

AGL
Weight
0
0.020811
0
0
0.818142 -3.4541E-06
0
0
0.156527 6.14319E-06
0.00452 -5.7951E-10
2.68854E-06

Syntax:C30*B32*B21

ANZ

BHP

BRAMBLES

0
0
0
0

0
0.000359205
3.8247E-06

0
0

0.00036303

Portfolio
Variance

Portfolio Std.
Deviation

0.004513

0.067178

WiW j COV (i, j ) OR

2
P

i 1 j 1
n

Wi
2
P

i 1

2
i

W W COV (i, j)

i 1,i j j 1

NEWS CORP

0.005972717

DELTA
0

NEWS CORP
0

1.9765E-06
1.9765E-06

= SUM =

0.00073539

Step Six: Create efficient frontier

Efficient Set
Portfolio Std.Dev.
Target Return
0.0674
0.0030
0.0628
0.0040
0.0584
0.0050
0.0542
0.0060
0.0503
0.0070
0.0469
0.0080
0.0438
0.0090
0.0414
0.0100
0.0387
0.0120
0.0374
0.0140
0.0370
0.0150
0.0374
0.0160
0.0388
0.0180
0.0413
0.0200
0.0430
0.0210
0.0453
0.0220
0.0483
0.0230
0.0517
0.0240
0.0536
0.0250

Minimum Variance Front

0.0300
0.0250
0.0200
0.0150
0.0100
0.0050
0.0000
0.0000

0.0200

Create the
Minimum Variance Frontier using the
Chart functionality within Excel.

0.0400

Minimum Variance Frontier

Minimum Variance
Frontier

0.0600

0.0800

 j cov(i, m) / m2

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP

Cov(i,asx)
0.00080859
0.00157412
0.001590212
0.001043943
0.001987872
0.001043163

Calculation of Beta using Regre

To Calculate the Beta, go to To
click on the Regression, follow
See results below (Beta is repre
Calculation of Beta
using Direct Method

Beta (i)
0.627108
1.220820
1.233301
0.809638
1.541709
0.809033

SUMMARY OUTPUT

Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
ANOVA
Regression
Residual
Total
Coefficients
Intercept
X Variable 1

Calculation of Beta using Regression for Stocks

To Calculate the Beta, go to Tools and click on Data Analysis, then look for Regression.
click on the Regression, follow the necessary steps
See results below (Beta is represented by the X coefficient)
SUMMARY OUTPUT

Regression Statistics
0.400783
0.160627
0.14238
0.052583
48

df

SS
MS
F
Significance F
1 0.02434 0.02434 8.802816 0.004759
46 0.127189 0.002765
47 0.151528

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
0.01154 0.007785 1.482339 0.145069 -0.00413 0.02721 -0.00413 0.02721
0.627108 0.211364 2.966954 0.004759 0.201654 1.052562 0.201654 1.052562

Share Names
AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP
RISK FREE ASSET

Weights (W)
0.0526
0.0610
0.0000
0.3536
0.0000
0.0346
0.4983

Expected
Return (ER)
0.0167
0.0188
0.0027
0.0244
0.0027
0.0131
0.0058

ER * W
0.0009
0.0011
0.0000
0.0086
0.0000
0.0005
0.0029
0.014000

Variance (V)
0.0032
0.0041
0.0051
0.0029
0.0144
0.0060
0.0000

(W^2)*V
0.0000
0.0000
0.0000
0.0004
0.0000
0.0000
0.0000
0.000391

ANZ

BHP

BRAMBLES

DELTA

0.0041
0.0009
0.0013
0.0013
0.0009
0.0000

0.0051
0.0005
0.0028
0.0010
0.0000

0.0029
0.0015
0.0006
0.0000

0.0144
0.0028
0.0000

1.000000

Variance-Covariance Matrix

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP
RISK FREE

AGL
0.0032
0.0014
-0.0002
0.0012
0.0019
0.0000
0.0000

COVARIANCE

AGL
ANZ
BHP
BRAMBLES
DELTA
NEWS CORP
RISK FREE

AGL
Weight
0.0526
0.0526
0.0610 4.50818E-06
0.0000
0
0.3536 2.31771E-05
0.0000
0
0.0346 -1.1194E-08
0.4983
0

ANZ
0.0610

BHP
0.0000

BRAMBLES
0.3536

0
2.89522E-05
0
1.8807E-06
0

0
0
0
0

0
7.17548E-06
0

0.000028

0.000031

0.000000

0.000007

CAPITAL MARKET LINE Efficient Set

Portfolio Std.Dev.
Target Return
0.0000
0.0058
0.0052
0.0080
0.0114
0.0100
0.0172
0.0120
0.0229
0.0140
0.0285
0.0160
0.0339
0.0180
0.0397
0.0200
0.0423
0.0210

0.030000
0.025000

0.020000
0.015000

Efficient Set
Portfolio Std.Dev.
Target Return
0.067380
0.003000
0.062779
0.004000
0.058373
0.005000
0.054209
0.006000

0.010000
0.005000
0.000000
0.000000 0.020000 0.040000 0.060000

0.050345
0.046856
0.043832
0.041431
0.038726
0.037393
0.036953

0.037405
0.038759
0.041324
0.043030
0.045346
0.048283
0.051747
0.053645

0.007000
0.008000
0.009000
0.010000
0.012000
0.014000
0.015000
0.016000
0.018000
0.020000
0.021000
0.022000
0.023000
0.024000
0.025000

0.000000
0.000000 0.020000 0.040000 0.060000

Portfolio
Variance

Portfolio Std.
Deviation

0.0005

NEWS CORP

RISK FREE

0.0060
0.0000

0.0000

DELTA
NEWS CORP
0.0000
0.0346

0
0
0.000000

0.0229

RISK FREE
0.4983

0
0.000000
SUM =

0.000131

Minimum Variance
Frontier
CML

0.060000 0.080000

0.060000 0.080000