International Financial Management 6th Edition by Sanjiv Eun, Cheol Resnick, Bruce Sabherwal

Exercise 4

Suppose you are interested in investing in the stock markets of 7 countries--i.e., Canada, France, Germany, Japan, Switzerland, the United Kingdom, and the United States--the same 7 countries that appear in Exhibit 15.9. Specifically, you would like to solve for the optimal (tangency) portfolio comprising the above seven stock markets. In solving the optimal portfolio, use the input data (i.e. correlation coefficients, means, and standard deviations) provided in Exhibit 15.4. The risk-free interest rate is assumed to be 0.5% per month and you can take a short position in any stock market. What are the optimal weights for each of the seven stock markets This problem can be solved using MPTSolver.xls spreadsheet.