1. Financial Modeling Data Collection & Integration Graph Rates of Return
Efficient Portfolio Frontier
Regression
CAPM
Vitex.xls

2. Efficient Portfolio Frontier

3. Prepare Spreadsheet New worksheet Label it EPF Data Returns +
Candlestick
EPF

4. Inputs Relay inputs from the Returns tab Rule #3: Always color code
Relayed data is coded green so that there is no temptation to change these numbers directly.
=Returns!D2
=Returns!A43
=Returns!E43

5. Prepare Spreadsheet Calculate Correlation Coefficient
=CORREL( Returns!$D$3:$D$38, Returns!$E$3:$E$38)
BRK-b data
Correlation function
LLY data

6. Portfolios Begin with 100% BRK-b E[R]=((E3*$B$4)+(F3*$C$4))
Risk =SQRT( (E3*$B$5)^2 + (2*(E3*$B$5*$B$6*F3*$C$5)) + (F3*$C$5)^2 )
100%
=1- $E3
Note that parameters are locked and weights are unlocked cell addresses

7. Portfolios Set the portfolio for a 1% increment
copy drag formulae down
E3-0.01

8. Portfolios
Copy drag down to 0% BRK-b
© Oltheten & Waspi 2012

9. Minimum Variance Portfolio
=Min(H:H)
Finds the minimum value in column H
=Match($B$10,H:H,0)
Finds the row in which that minimum lives.
=Index(E:E,$B$11)
=Index(F:F,$B$11)
Returns the value in E and F in the same row.

10. Efficient Portfolio Frontier
The portfolio is efficient until we get below the MVP
I3=IF(ROW()<=$B$11,H3,NA())
MVP in row 55
If current row ≤ 55
Risk for this portfolio
else generate an #N/A

11. Efficient Portfolio Frontier
This is the efficient part of the portfolio frontier
The #N/A error allows the graph to build properly

12. Excel assumes that E[R] is on the x axis and Risk is on the y axis
Graph
Generate an XY Scatter from columns GHI
The default graph is appalling
Excel assumes that E[R] is on the x axis and Risk is on the y axis

13. Graph
Select Data

14. Graph Change x and y axis for both series
=EPF$H$2
=EPF$G$3:$G$103
=EPF$H$3:$H$103
=EPF$H$2
=EPF$G$3:$G$103
=EPF$H$3:$H$103
Risk in column H goes on the x axis
Expected Return in column G goes on the y axis

15. Graph Properly formatted Series EPF is red 1.5pt
Series Risk is black 0.5pt
© Oltheten & Waspi 2012

16. Minimum Variance Portfolio
In the Returns tab set portfolio weights in rows 45:46

17. Minimum Variance Portfolio
Calculate MVP in each month
G3 = G$45*$D3 + G$46*$E3
48% of BRK-b
52% of LLY

18. Portfolio Returns
If you lock the cells correctly then this formula works for any portfolio specified into rows 45:46

19. Market Model