1. Use the same datafile as HW1 (HSI.xlsx), and construct the same monthly return series as
dataframe like HW1.
2. Assuming the expected return to be the same as the stocks’ simple average returns, follow the
equations in Lecture 2, find A, B, C
3. Assuming Hong Kong risk-free rate at 2% (per annum), using a range of 𝜇𝑝 from 0.5% to 10% (step
each 0.5%), find the corresponding 𝜆 and 𝛾 for each 𝜇𝑝, the weights of the portfolio (for each
stock) for each 𝜇𝑝, and the corresponding standard deviation of the efficient portfolios. ENSURE
you keep a list of the weights for each 𝜇𝑝 as you will need to output them in Q5. Plot the efficient
frontier with correct x-label and y-label. Color the curved efficient frontier as ‘red’
4. With the presence of risk-free rate, construct the efficient frontier using the same range of 𝜇𝑝 as
Q3. Plot the efficient frontier on the same graph as Q3 (a straight efficient frontier). Color it with
‘Blue’
5. Output the weights of the portfolio for each of 𝜇𝑝 (20 weight vectors) under Q3 and Q4 as
dataframes and save the csv files as weights_withoutRf.csv and weights_withRf.csv.