Dataset: attached

This dataset contains annual total returns between 1926-2012
from investments in several classes of assets.
Segment the data into two time periods, 1926-1965 and 1966-2012, and
then answer the following questions for both periods.

Questions:

1)
Compute historical means, variances, and
standard deviations of returns for each asset-class for the time periods.

2)
Using returns on S&P500 common stocks and
returns on long-term government bonds, address the following questions:

a)
Complete the covariance and correlation
coefficient between the returns of the 2 asset classes.

b)
Study portfolios of these two asset-classes in
the following manner.Let “W” be the
weight of investmentin S&P500
stocks and let the weight in long term government bonds be “(l-w)”. Allow “w”
to vary from -.05 to 1.5 in increments of .05 (thatis, consider short sales also).Using your estimates of mean, standard
deviation, and correlation that are relevant to these two asset-classes,
construct a table showing for each portfolio, (combination of weights), the
mean and standard deviation of returns.

c)
Graph these portfolios in standard
deviation/mean space with standard deviation on the x-axis and the mean on the
y-axis.Label all relevant points on the
portfolio frontier, including the locations of the two individual asset
classes, and the short sales segments of the frontier.Contrast the impact of the choice of
estimation histories on portfolio formation by superimposing the two portfolio
frontiers derived from the two different time periods in a single graph.Comment on the results.

Attachments:

ASSETS–1-.xls