Estimate Fama-French 3 Factor & 5 Factor Betas for Apple Inc and Exxon Mobil and test the

statistical significance o
Month Stock Price (USD) 5 Factor Returns
Apple Exxon
Inc Mobil Rm-Rf SMB HML RMW CMA
201301 65.07 89.97 0.0557 0.0055 0.0095 -0.0166 0.0149
201302 63.06 89.55 0.0129 -0.0037 0.0003 -0.0069 0.0047
201303 63.24 90.11 0.0403 0.0077 -0.0029 0.0008 0.0137
201304 63.25 88.99 0.0155 -0.0229 0.0063 0.0008 0.0049
201305 64.25 90.47 0.028 0.0207 0.026 -0.0164 -0.008
201306 56.65 90.35 -0.012 0.0141 -0.0018 -0.0033 -0.0007
201307 64.65 93.75 0.0565 0.0181 0.0056 -0.0149 0.0058
201308 69.6 87.16 -0.0271 -0.0001 -0.0278 0.0057 -0.0217
201309 68.11 86.04 0.0377 0.0267 -0.0119 -0.0068 -0.0129
201310 74.67 89.62 0.0418 -0.015 0.0114 0.0267 0.0089
201311 79.44 93.48 0.0312 0.0136 0.0024 0.0007 0.0007
201312 80.15 101.2 0.0281 -0.0053 -0.0031 -0.0052 0.0007
201401 71.51 92.16 -0.0332 0.0059 -0.0209 -0.0403 -0.0138
201402 75.18 96.27 0.0465 0.0014 -0.004 -0.0026 -0.0044
201403 76.68 97.68 0.0043 -0.0118 0.0508 0.0217 0.0189
201404 84.3 102.41 -0.0019 -0.0417 0.0114 0.0351 0.0105
201405 90.43 100.53 0.0206 -0.019 -0.0027 0.0013 -0.0106
201406 92.93 100.68 0.0261 0.0309 -0.0074 -0.0201 -0.0194
201407 95.6 98.94 -0.0204 -0.0426 0.0001 0.0095 0.0048
201408 102.5 99.46 0.0424 0.0028 -0.0058 -0.0064 -0.0068
201409 100.75 94.05 -0.0197 -0.0379 -0.0123 0.0118 -0.0053
201410 108 96.71 0.0252 0.0378 -0.0168 -0.0047 -0.0014
201411 118.93 90.54 0.0255 -0.0229 -0.0299 0.0128 0.002
201412 110.38 92.45 -0.0006 0.0287 0.0206 -0.0117 0.0088
201501 117.16 87.42 -0.0311 -0.0087 -0.0347 0.0171 -0.0171
201502 128.46 88.54 0.0613 0.0021 -0.0179 -0.0111 -0.0171
201503 124.43 85 -0.0112 0.0305 -0.0046 -0.0001 -0.0052
201504 125.15 87.37 0.0059 -0.0304 0.0186 -0.0006 -0.005
201505 130.28 85.2 0.0136 0.0076 -0.0137 -0.017 -0.0075
201506 125.42 83.2 -0.0153 0.0285 -0.0079 0.0058 -0.0149
201507 121.3 79.21 0.0154 -0.0457 -0.0412 0.0002 -0.0257
201508 112.76 75.24 -0.0604 0.0041 0.0268 0.0066 0.0122
201509 110.3 74.35 -0.0308 -0.0279 0.0052 0.0183 -0.0052
201510 119.5 82.74 0.0775 -0.0215 -0.0008 0.0081 0.0046
201511 118.3 81.66 0.0056 0.0333 -0.0052 -0.0258 -0.0113
201512 105.26 77.95 -0.0217 -0.0298 -0.0258 0.0032 0.0008
201601 97.34 77.85 -0.0577 -0.0347 0.021 0.0269 0.03
201602 96.69 80.15 -0.0007 0.0095 -0.0048 0.0323 0.021
201603 108.99 83.59 0.0696 0.011 0.0112 0.0093 -0.0006
201604 93.74 88.4 0.0092 0.0117 0.0326 -0.0287 0.0196
201605 99.86 89.02 0.0178 -0.0069 -0.0181 -0.0102 -0.026
201606 95.6 93.74 -0.0005 0.0048 -0.0149 0.0119 0.0192
201607 104.21 88.95 0.0395 0.0269 -0.0113 0.0146 -0.0127
201608 106.1 87.14 0.005 0.0167 0.0331 -0.0154 -0.0036
201609 113.05 87.28 0.0025 0.0171 -0.0148 -0.024 -0.0003
201610 113.54 83.32 -0.0202 -0.04 0.0418 0.0114 0.002
201611 110.52 87.3 0.0486 0.0693 0.0827 0.0008 0.0367
201612 115.82 90.26 0.0182 0.0037 0.036 0.0106 -0.0026
201701 121.35 83.89 0.0194 -0.0131 -0.0278 -0.0016 -0.0099
201702 136.99 81.32 0.0357 -0.0212 -0.018 0.0084 -0.0175
201703 143.66 82.01 0.0017 0.0073 -0.0318 0.0053 -0.01
201704 143.65 81.65 0.0109 0.0048 -0.019 0.0183 -0.0155
201705 152.76 80.5 0.0106 -0.031 -0.0378 0.0116 -0.0184
201706 144.02 80.73 0.0078 0.0249 0.0132 -0.0204 -0.0006
201707 148.73 80.04 0.0187 -0.0157 -0.0028 -0.0069 -0.0015
201708 164 76.33 0.0016 -0.0188 -0.0224 0.003 -0.0244
201709 154.12 81.98 0.0251 0.0484 0.0303 -0.0126 0.0164
201710 169.04 83.35 0.0225 -0.0195 -0.0006 0.0093 -0.0334
201711 171.85 83.29 0.0312 -0.0039 -0.0005 0.0323 0
201712 169.23 83.64 0.0106 -0.0101 0.0014 0.0073 0.0165
201801 167.43 87.3 0.0558 -0.0316 -0.0137 -0.0058 -0.0089
201802 178.12 75.74 -0.0365 0.0036 -0.0119 0.0053 -0.0225
201803 167.78 74.61 -0.0235 0.0352 -0.0011 -0.0045 0
201804 165.26 77.75 0.0029 0.0098 0.0053 -0.0217 0.012
201805 186.87 81.24 0.0265 0.0474 -0.0316 -0.0182 -0.0139
201806 185.11 82.73 0.0048 0.0083 -0.0239 0.0073 0.0033
201807 190.29 81.51 0.0319 -0.019 0.0039 0.0169 0.0054
201808 227.63 80.17 0.0344 0.0074 -0.0412 -0.0034 -0.026

Step 1: Convert to excess returns

Month Ri-RF 5 Factor Returns
Exxon
APPLE Mobil Rm-Rf SMB HML RMW CMA
201302
201303
201304
201305
201306
201307
201308
201309
201310
201311
201312
201401
201402
201403
201404
201405
201406
201407
201408
201409
201410
201411
201412
201501
201502
201503
201504
201505
201506
201507
201508
201509
201510
201511
201512
201601
201602
201603
201604
201605
201606
201607
201608
201609
201610
201611
201612
201701
201702
201703
201704
201705
201706
201707
201708
201709
201710
201711
201712
201801
201802
201803
201804
201805
201806
201807
201808

Step 2: Estimate Factor Betas by Regression

t the statistical significance of their factor exposures
Rf

For factor Definitions

0 http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_5_factors_2x3.html
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.0001
0.0001
0.0002
0.0002
0.0001
0.0001
0.0002
0.0002
0.0002
0.0002
0.0002
0.0001
0.0003
0.0004
0.0004
0.0003
0.0005
0.0006
0.0006
0.0007
0.0009
0.0009
0.0009
0.0008
0.0009
0.0011
0.0011
0.0012
0.0014
0.0014
0.0014
0.0016
0.0016
Exxon 3F-->
ary/f-f_5_factors_2x3.html
Estimate Fama-French 3 Factor & 5 Factor Betas for Apple Inc and Exxon Mobil and test the statistical significance o
Month Stock Price (USD) 5 Factor Returns
Apple Exxon
Inc Mobil Mkt-RF SMB HML RMW CMA
201301 65.07 89.97 0.0557 0.0055 0.0095 -0.0166 0.0149
201302 63.06 89.55 0.0129 -0.0037 0.0003 -0.0069 0.0047
201303 63.24 90.11 0.0403 0.0077 -0.0029 0.0008 0.0137
201304 63.25 88.99 0.0155 -0.0229 0.0063 0.0008 0.0049
201305 64.25 90.47 0.028 0.0207 0.026 -0.0164 -0.008
201306 56.65 90.35 -0.012 0.0141 -0.0018 -0.0033 -0.0007
201307 64.65 93.75 0.0565 0.0181 0.0056 -0.0149 0.0058
201308 69.6 87.16 -0.0271 -0.0001 -0.0278 0.0057 -0.0217
201309 68.11 86.04 0.0377 0.0267 -0.0119 -0.0068 -0.0129
201310 74.67 89.62 0.0418 -0.015 0.0114 0.0267 0.0089
201311 79.44 93.48 0.0312 0.0136 0.0024 0.0007 0.0007
201312 80.15 101.2 0.0281 -0.0053 -0.0031 -0.0052 0.0007
201401 71.51 92.16 -0.0332 0.0059 -0.0209 -0.0403 -0.0138
201402 75.18 96.27 0.0465 0.0014 -0.004 -0.0026 -0.0044
201403 76.68 97.68 0.0043 -0.0118 0.0508 0.0217 0.0189
201404 84.3 102.41 -0.0019 -0.0417 0.0114 0.0351 0.0105
201405 90.43 100.53 0.0206 -0.019 -0.0027 0.0013 -0.0106
201406 92.93 100.68 0.0261 0.0309 -0.0074 -0.0201 -0.0194
201407 95.6 98.94 -0.0204 -0.0426 0.0001 0.0095 0.0048
201408 102.5 99.46 0.0424 0.0028 -0.0058 -0.0064 -0.0068
201409 100.75 94.05 -0.0197 -0.0379 -0.0123 0.0118 -0.0053
201410 108 96.71 0.0252 0.0378 -0.0168 -0.0047 -0.0014
201411 118.93 90.54 0.0255 -0.0229 -0.0299 0.0128 0.002
201412 110.38 92.45 -0.0006 0.0287 0.0206 -0.0117 0.0088
201501 117.16 87.42 -0.0311 -0.0087 -0.0347 0.0171 -0.0171
201502 128.46 88.54 0.0613 0.0021 -0.0179 -0.0111 -0.0171
201503 124.43 85 -0.0112 0.0305 -0.0046 -0.0001 -0.0052
201504 125.15 87.37 0.0059 -0.0304 0.0186 -0.0006 -0.005
201505 130.28 85.2 0.0136 0.0076 -0.0137 -0.017 -0.0075
201506 125.42 83.2 -0.0153 0.0285 -0.0079 0.0058 -0.0149
201507 121.3 79.21 0.0154 -0.0457 -0.0412 0.0002 -0.0257
201508 112.76 75.24 -0.0604 0.0041 0.0268 0.0066 0.0122
201509 110.3 74.35 -0.0308 -0.0279 0.0052 0.0183 -0.0052
201510 119.5 82.74 0.0775 -0.0215 -0.0008 0.0081 0.0046
201511 118.3 81.66 0.0056 0.0333 -0.0052 -0.0258 -0.0113
201512 105.26 77.95 -0.0217 -0.0298 -0.0258 0.0032 0.0008
201601 97.34 77.85 -0.0577 -0.0347 0.021 0.0269 0.03
201602 96.69 80.15 -0.0007 0.0095 -0.0048 0.0323 0.021
201603 108.99 83.59 0.0696 0.011 0.0112 0.0093 -0.0006
201604 93.74 88.4 0.0092 0.0117 0.0326 -0.0287 0.0196
201605 99.86 89.02 0.0178 -0.0069 -0.0181 -0.0102 -0.026
201606 95.6 93.74 -0.0005 0.0048 -0.0149 0.0119 0.0192
201607 104.21 88.95 0.0395 0.0269 -0.0113 0.0146 -0.0127
201608 106.1 87.14 0.005 0.0167 0.0331 -0.0154 -0.0036
201609 113.05 87.28 0.0025 0.0171 -0.0148 -0.024 -0.0003
201610 113.54 83.32 -0.0202 -0.04 0.0418 0.0114 0.002
201611 110.52 87.3 0.0486 0.0693 0.0827 0.0008 0.0367
201612 115.82 90.26 0.0182 0.0037 0.036 0.0106 -0.0026
201701 121.35 83.89 0.0194 -0.0131 -0.0278 -0.0016 -0.0099
201702 136.99 81.32 0.0357 -0.0212 -0.018 0.0084 -0.0175
201703 143.66 82.01 0.0017 0.0073 -0.0318 0.0053 -0.01
201704 143.65 81.65 0.0109 0.0048 -0.019 0.0183 -0.0155
201705 152.76 80.5 0.0106 -0.031 -0.0378 0.0116 -0.0184
201706 144.02 80.73 0.0078 0.0249 0.0132 -0.0204 -0.0006
201707 148.73 80.04 0.0187 -0.0157 -0.0028 -0.0069 -0.0015
201708 164 76.33 0.0016 -0.0188 -0.0224 0.003 -0.0244
201709 154.12 81.98 0.0251 0.0484 0.0303 -0.0126 0.0164
201710 169.04 83.35 0.0225 -0.0195 -0.0006 0.0093 -0.0334
201711 171.85 83.29 0.0312 -0.0039 -0.0005 0.0323 0
201712 169.23 83.64 0.0106 -0.0101 0.0014 0.0073 0.0165
201801 167.43 87.3 0.0558 -0.0316 -0.0137 -0.0058 -0.0089
201802 178.12 75.74 -0.0365 0.0036 -0.0119 0.0053 -0.0225
201803 167.78 74.61 -0.0235 0.0352 -0.0011 -0.0045 0
201804 165.26 77.75 0.0029 0.0098 0.0053 -0.0217 0.012
201805 186.87 81.24 0.0265 0.0474 -0.0316 -0.0182 -0.0139
201806 185.11 82.73 0.0048 0.0083 -0.0239 0.0073 0.0033
201807 190.29 81.51 0.0319 -0.019 0.0039 0.0169 0.0054
201808 227.63 80.17 0.0344 0.0074 -0.0412 -0.0034 -0.026

Step 1: Convert to excess returns

Month Ri-RF 5 Factor Returns
Exxon
APPLE Mobil Mkt-RF SMB HML RMW CMA
201302 -0.03089 -0.00467 0.0129 -0.0037 0.0003 -0.0069 0.0047
201303 0.00285 0.006253 0.0403 0.0077 -0.0029 0.0008 0.0137
201304 0.00016 -0.01243 0.0155 -0.0229 0.0063 0.0008 0.0049
201305 0.01581 0.016631 0.028 0.0207 0.026 -0.0164 -0.008
201306 -0.11829 -0.00133 -0.012 0.0141 -0.0018 -0.0033 -0.0007
201307 0.14122 0.037631 0.0565 0.0181 0.0056 -0.0149 0.0058
201308 0.07657 -0.07029 -0.0271 -0.0001 -0.0278 0.0057 -0.0217
201309 -0.02141 -0.01285 0.0377 0.0267 -0.0119 -0.0068 -0.0129
201310 0.09631 0.041609 0.0418 -0.015 0.0114 0.0267 0.0089
201311 0.06388 0.043071 0.0312 0.0136 0.0024 0.0007 0.0007
201312 0.00894 0.082585 0.0281 -0.0053 -0.0031 -0.0052 0.0007
201401 -0.1078 -0.08933 -0.0332 0.0059 -0.0209 -0.0403 -0.0138
201402 0.05132 0.044596 0.0465 0.0014 -0.004 -0.0026 -0.0044
201403 0.01995 0.014646 0.0043 -0.0118 0.0508 0.0217 0.0189
201404 0.09937 0.048423 -0.0019 -0.0417 0.0114 0.0351 0.0105
201405 0.07272 -0.01836 0.0206 -0.019 -0.0027 0.0013 -0.0106
201406 0.02765 0.001492 0.0261 0.0309 -0.0074 -0.0201 -0.0194
201407 0.02873 -0.01728 -0.0204 -0.0426 0.0001 0.0095 0.0048
201408 0.07218 0.005256 0.0424 0.0028 -0.0058 -0.0064 -0.0068
201409 -0.01707 -0.05439 -0.0197 -0.0379 -0.0123 0.0118 -0.0053
201410 0.07196 0.028283 0.0252 0.0378 -0.0168 -0.0047 -0.0014
201411 0.1012 -0.0638 0.0255 -0.0229 -0.0299 0.0128 0.002
201412 -0.07189 0.021096 -0.0006 0.0287 0.0206 -0.0117 0.0088
201501 0.06142 -0.05441 -0.0311 -0.0087 -0.0347 0.0171 -0.0171
201502 0.09645 0.012812 0.0613 0.0021 -0.0179 -0.0111 -0.0171
201503 -0.03137 -0.03998 -0.0112 0.0305 -0.0046 -0.0001 -0.0052
201504 0.00579 0.027882 0.0059 -0.0304 0.0186 -0.0006 -0.005
201505 0.04099 -0.02484 0.0136 0.0076 -0.0137 -0.017 -0.0075
201506 -0.0373 -0.02347 -0.0153 0.0285 -0.0079 0.0058 -0.0149
201507 -0.03285 -0.04796 0.0154 -0.0457 -0.0412 0.0002 -0.0257
201508 -0.0704 -0.05012 -0.0604 0.0041 0.0268 0.0066 0.0122
201509 -0.02182 -0.01183 -0.0308 -0.0279 0.0052 0.0183 -0.0052
201510 0.08341 0.112845 0.0775 -0.0215 -0.0008 0.0081 0.0046
201511 -0.01004 -0.01305 0.0056 0.0333 -0.0052 -0.0258 -0.0113
201512 -0.11023 -0.04543 -0.0217 -0.0298 -0.0258 0.0032 0.0008
201601 -0.07534 -0.00138 -0.0577 -0.0347 0.021 0.0269 0.03
201602 -0.00678 0.029444 -0.0007 0.0095 -0.0048 0.0323 0.021
201603 0.12701 0.04272 0.0696 0.011 0.0112 0.0093 -0.0006
201604 -0.14012 0.057343 0.0092 0.0117 0.0326 -0.0287 0.0196
201605 0.06519 0.006914 0.0178 -0.0069 -0.0181 -0.0102 -0.026
201606 -0.04276 0.052922 -0.0005 0.0048 -0.0149 0.0119 0.0192
201607 0.08986 -0.0513 0.0395 0.0269 -0.0113 0.0146 -0.0127
201608 0.01794 -0.02055 0.005 0.0167 0.0331 -0.0154 -0.0036
201609 0.0653 0.001407 0.0025 0.0171 -0.0148 -0.024 -0.0003
201610 0.00413 -0.04557 -0.0202 -0.04 0.0418 0.0114 0.002
201611 -0.0268 0.047568 0.0486 0.0693 0.0827 0.0008 0.0367
201612 0.04786 0.033806 0.0182 0.0037 0.036 0.0106 -0.0026
201701 0.04745 -0.07087 0.0194 -0.0131 -0.0278 -0.0016 -0.0099
201702 0.12848 -0.03104 0.0357 -0.0212 -0.018 0.0084 -0.0175
201703 0.04829 0.008085 0.0017 0.0073 -0.0318 0.0053 -0.01
201704 -0.00037 -0.00469 0.0109 0.0048 -0.019 0.0183 -0.0155
201705 0.06292 -0.01458 0.0106 -0.031 -0.0378 0.0116 -0.0184
201706 -0.05781 0.002257 0.0078 0.0249 0.0132 -0.0204 -0.0006
201707 0.0321 -0.00915 0.0187 -0.0157 -0.0028 -0.0069 -0.0015
201708 0.10197 -0.04705 0.0016 -0.0188 -0.0224 0.003 -0.0244
201709 -0.06114 0.073121 0.0251 0.0484 0.0303 -0.0126 0.0164
201710 0.09591 0.015811 0.0225 -0.0195 -0.0006 0.0093 -0.0334
201711 0.01572 -0.00162 0.0312 -0.0039 -0.0005 0.0323 0
201712 -0.01605 0.003402 0.0106 -0.0101 0.0014 0.0073 0.0165
201801 -0.01154 0.042859 0.0558 -0.0316 -0.0137 -0.0058 -0.0089
201802 0.06275 -0.13352 -0.0365 0.0036 -0.0119 0.0053 -0.0225
201803 -0.05915 -0.01602 -0.0235 0.0352 -0.0011 -0.0045 0
201804 -0.01622 0.040886 0.0029 0.0098 0.0053 -0.0217 0.012
201805 0.12936 0.043487 0.0265 0.0474 -0.0316 -0.0182 -0.0139
201806 -0.01082 0.016941 0.0048 0.0083 -0.0239 0.0073 0.0033
201807 0.02658 -0.01615 0.0319 -0.019 0.0039 0.0169 0.0054
201808 0.19463 -0.01804 0.0344 0.0074 -0.0412 -0.0034 -0.026

Apple 3F--> SUMMARY OUTPUT Using Data Analysis - Regression

Three Factor Model
Regression Statistics
Multiple 0.606377
R Square 0.367693
Adjusted 0.337583
Standard 0.055417
Observati 67

ANOVA
df SS MS F Significance F
Regressio 3 0.11250655 0.037502182 12.2116927 2.1369E-06
Residual 63 0.19347338 0.003071006
Total 66 0.30597993

Coefficients
Standard Error t Stat P-value
Intercept 0.00396 0.00739301 0.535585954 0.59413052 <---3 factor alpha
Mkt-RF 1.268843 0.24492562 1.097649983 0.27653499 <---modified null hyp: mkt be
SMB -0.39048 0.28695192 -1.3607765 0.17843267 ** denotes p val <0.01,
HML -0.85519 0.30516992 -2.80233489 0.00673275 ** * denotes p val <0.05)

Interpretation: The stock of Apple Inc has a statistically significant negative factor exposure based on
Fama-French 3 factor model only in case of value (HML) factor.

Apple 5F--> SUMMARY OUTPUT

Five Factor Model
Regression Statistics
Multiple 0.724685
R Square 0.525169
Adjusted 0.486248
Standard 0.048804
Observati 67

ANOVA
df SS MS F Significance F
Regressio 5 0.16069117 0.032138234 13.4933514 7.2843E-09
Residual 61 0.14528876 0.002381783
Total 66 0.30597993

Coefficients
Standard Error t Stat P-value
Intercept -0.0014 0.00661891 -0.21114384 0.83347884
Mkt-RF 1.236914 0.2163396 1.095102238 0.27777696
SMB 0.093422 0.29007373 0.322063629 0.74850564
HML -0.1479 0.35159396 -0.4206536 0.67548635
RMW 1.595652 0.46663848 3.419461797 0.00112394 **
CMA -2.11562 0.57957545 -3.6502973 0.00054502 **
Interpretation: The stock of Apple Inc has a statistically significant positive factor exposure based on
Fama-French 5 factor model in case of profitability (RMW) factor, and statistically significant negative
factor exposure in case of investment (CMA) factor.
t the statistical significance of their factor exposures
RF

For factor Definitions

0 http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_5_factors_2x3.html
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.0001
0.0001
0.0002
0.0002
0.0001
0.0001
0.0002
0.0002
0.0002
0.0002
0.0002
0.0001
0.0003
0.0004
0.0004
0.0003
0.0005
0.0006
0.0006
0.0007
0.0009
0.0009
0.0009
0.0008
0.0009
0.0011
0.0011
0.0012
0.0014
0.0014
0.0014
0.0016
0.0016
 Exxon 3F--SUMMARY OUTPUT

Regression Statistics
Multiple R 0.654644
R Square 0.428559
Adjusted R S 0.401348
Standard Erro 0.033173
Observations 67

ANOVA
df SS MS F Significance F
Regression 3 0.051994 0.017331 15.74922 9.46189E-08
Residual 63 0.069329 0.0011
Total 66 0.121323

Coefficients
Standard Error t Stat P-value
<---3 factor alpha Intercept -0.009297 0.004426 -2.1007 0.039675
<---modified null hyp: mkt beta=1 Mkt-RF 0.807796 0.146616 -1.310941 0.194636
** denotes p val <0.01, SMB 0.072362 0.171773 0.421263 0.674997
* denotes p val <0.05) HML 0.661978 0.182679 3.623729 0.000581 **

tive factor exposure based on Interpretation: The stock of Exxon Mobil has a statistically significant positive factor exp
Fama-French 3 factor model only in case of value (HML) factor.

Exxon 5F--SUMMARY OUTPUT

Regression Statistics
Multiple R 0.730491
R Square 0.533617
Adjusted R S 0.495389
Standard Erro 0.030456
Observations 67

ANOVA
df SS MS F Significance F
Regression 5 0.06474 0.012948 13.95874 4.30914E-09
Residual 61 0.056583 0.000928
Total 66 0.121323

Coefficients
Standard Error t Stat P-value
Intercept -0.00724 0.004131 -1.75288 0.084647
Mkt-RF 0.843705 0.135009 -1.157662 0.251515
SMB 0.040505 0.181024 0.223756 0.823695
HML 0.138088 0.219416 0.629346 0.531473
RMW -0.11228 0.291211 -0.385564 0.701161
CMA 1.328442 0.36169 3.672874 0.000507 **
ve factor exposure based on Interpretation: The stock of Exxon Mobil has a statistically significant positive factor exp
atistically significant negative Fama-French 3 factor model only in case of investment (CMA) factor.
ary/f-f_5_factors_2x3.html
gnificance F

y significant positive factor exposure based on

gnificance F
y significant positive factor exposure based on
MA) factor.
You are provided with historical excess returns (Ri-Rf), the four factor beta and variance-covariance matrix of 30 stocks.
1. Set up portfolio optimisation objectives in terms of portfolio variance and tracking error and constraints in terms of we
stock-wise) and factor tilt.
2. Form a buy-only portfolio which minimises the tracking error vis-à-vis the market index with factor tilt of -0.2 on mark
value/growth (HML) factor, but is neutral on size and momentum factors. Additional constraints include max weight for a
weight for a stock of 0.15.
3. Construct a 130/30 extension strategy with objective to minimise the portfolio variance.

Dataset 1: Excess Returns (Ri-Rf)

MONTH ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
201204 -0.019 0.081 -0.041 -0.039 -0.085
201205 -0.042 0.138 -0.129 -0.075 -0.034
201206 -0.021 0.032 0.121 0.032 0.003
201207 -0.011 -0.070 0.019 0.041 -0.023
201208 -0.068 -0.002 -0.048 0.002 -0.185
201209 0.124 0.071 0.131 0.128 0.072
201210 -0.012 0.000 0.035 -0.017 0.009
201211 0.018 0.112 0.106 0.058 0.247
201212 0.035 0.015 0.024 0.098 -0.067
201301 0.104 0.011 0.102 -0.056 0.064
201302 -0.083 -0.053 -0.114 -0.034 -0.053
201303 -0.004 0.139 -0.037 -0.096 -0.104
201304 0.039 -0.053 0.141 0.042 0.086
201305 0.040 0.032 -0.048 -0.038 -0.061
201306 -0.020 0.021 -0.081 0.046 -0.036
201307 -0.164 0.088 -0.171 0.026 0.176
201308 -0.007 -0.183 -0.201 -0.058 -0.143
201309 0.095 0.089 0.197 0.073 0.058
201310 0.045 0.167 0.207 0.064 0.138
201311 0.078 -0.072 -0.062 -0.079 -0.109
201312 -0.024 -0.032 0.118 -0.040 0.003
201401 -0.064 -0.045 -0.146 -0.012 -0.054
201402 0.135 -0.005 0.124 0.014 -0.094
201403 0.114 0.148 0.146 0.062 0.102
201404 -0.002 -0.082 0.034 -0.085 0.021
201405 0.192 0.001 0.202 0.014 0.043
201406 0.071 0.166 0.094 0.177 -0.028
201407 0.067 0.054 0.012 -0.089 0.099
201408 0.079 -0.014 0.008 0.081 -0.009
201409 -0.025 0.004 -0.056 0.032 0.086
201410 0.018 0.037 0.155 0.105 -0.021
201411 0.014 0.128 0.091 0.006 -0.047
201412 0.090 0.004 0.037 -0.083 -0.083
201501 0.063 0.134 0.166 -0.027 0.050
201502 -0.036 -0.052 0.036 -0.102 -0.048
201503 -0.075 -0.018 -0.093 -0.074 0.096
201504 0.025 -0.062 0.007 -0.039 -0.037
201505 0.016 0.025 0.025 0.181 0.108
201506 -0.055 -0.042 -0.052 0.089 -0.019
201507 0.046 0.162 0.029 0.007 -0.010
201508 0.088 -0.043 -0.123 -0.111 -0.154
201509 -0.161 -0.015 -0.028 0.019 -0.052
201510 -0.018 -0.018 -0.047 0.098 0.026
201511 -0.098 0.009 -0.018 -0.032 -0.046
201512 -0.034 0.046 -0.047 0.015 0.010
201601 -0.189 -0.022 -0.097 -0.081 -0.153
201602 -0.082 -0.028 -0.085 -0.065 0.089
201603 0.264 0.019 0.180 0.113 0.103
201604 -0.043 -0.006 0.057 0.028 0.032
201605 -0.197 0.128 0.086 0.048 -0.039
201606 0.067 0.020 0.029 0.020 0.035
201607 0.117 0.106 0.028 0.001 -0.016
201608 0.127 0.034 0.085 0.098 -0.085
201609 -0.028 -0.003 -0.095 -0.055 -0.059
201610 0.191 -0.084 -0.107 -0.004 0.010
201611 -0.100 -0.096 -0.040 -0.058 0.013
201612 -0.040 -0.086 -0.047 -0.024 -0.064
201701 0.089 0.084 0.030 0.072 0.134
201702 0.024 0.051 0.082 -0.033 0.045
201703 0.121 0.041 -0.035 0.013 -0.047

Dataset 2: Beta estimates

Stocks GICS Sector Beta Estimates
Rm-Rf SMB HML WML
ADANIPORTS Industrials 1.068 0.120 0.095 -0.180
ASIANPAINT Materials 1.231 -0.084 -0.053 0.529
AXISBANK Financials 1.843 -0.273 0.115 -0.214
BAJAJAUTO Con Disc 1.135 0.042 0.122 0.224
BHARTIARTL Telecom 0.590 -0.576 0.359 -0.129
CIPLA Health Care 0.485 0.415 0.395 0.385
COALINDIA Energy 0.721 0.080 0.227 -0.302
DRREDDY Health Care 0.345 0.192 0.083 0.438
HDFCBANK Financials 1.161 0.033 -0.014 -0.041
HEROMOTOCO Cons Disc 0.991 0.074 0.031 -0.187
HINDUNILVR Cons Staples 0.531 -0.372 0.171 0.147
HDFC Financials 1.328 0.118 -0.153 0.334
ICICIBANK Financials 1.702 -0.113 0.072 -0.186
INFY Info Tech 0.941 0.162 -0.534 0.371
ITC Cons Staples 0.821 -0.148 -0.081 0.128
KOTAKBANK Financials 1.024 -0.018 -0.082 -0.240
LT Industrials 1.712 0.040 0.046 -0.112
LUPIN Health Care 0.127 -0.139 0.047 0.385
MAHM Cons Disc 0.819 0.198 0.077 -0.053
MARUTI Cons Disc 1.553 0.305 0.202 -0.255
NTPC Utilities 0.447 0.102 0.428 -0.405
ONGC Energy 1.018 -0.097 0.171 -0.122
POWERGRID Utilities 0.647 0.161 0.371 0.019
RELIANCE Energy 0.848 -0.091 -0.015 -0.210
SBIN Financials 1.343 -0.109 0.392 -0.353
SUNPHARMA Health Care 0.438 -0.303 -0.042 0.366
TCS Info Tech 0.513 0.270 -0.218 0.287
TATAMOTORS Cons Disc 1.635 -0.043 -0.042 -0.152
TATASTEEL Materials 0.647 0.035 0.244 -1.057
WIPRO Info Tech 0.504 0.183 -0.097 0.351
INDEX 1.000 0.000 0.000 0.000

Dataset 3: Covariance Matrix

ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
ADANIPORTS 0.101 0.019 0.025 0.018 0.022
ASIANPAINT 0.019 0.069 0.021 0.015 0.018
AXISBANK 0.025 0.021 0.119 0.019 0.023
BAJAJAUTO 0.018 0.015 0.019 0.058 0.016
BHARTIARTL 0.022 0.018 0.023 0.016 0.086
CIPLA 0.018 0.015 0.020 0.014 0.017
COALINDIA 0.019 0.016 0.020 0.014 0.017
DRREDDY 0.018 0.015 0.019 0.014 0.017
HDFCBANK 0.014 0.012 0.015 0.011 0.013
HEROMOTOCO 0.019 0.016 0.021 0.014 0.018
HINDUNILVR 0.016 0.013 0.017 0.012 0.015
HDFC 0.016 0.013 0.017 0.012 0.014
ICICIBANK 0.023 0.019 0.025 0.017 0.021
INFY 0.020 0.017 0.022 0.015 0.019
ITC 0.013 0.011 0.015 0.010 0.012
KOTAKBANK 0.016 0.013 0.017 0.012 0.014
LT 0.023 0.019 0.025 0.017 0.021
LUPIN 0.019 0.016 0.021 0.014 0.018
MAHM 0.017 0.014 0.019 0.013 0.016
MARUTI 0.025 0.020 0.027 0.019 0.023
NTPC 0.020 0.016 0.022 0.015 0.018
ONGC 0.020 0.017 0.022 0.015 0.019
POWERGRID 0.015 0.012 0.016 0.011 0.014
RELIANCE 0.017 0.014 0.018 0.013 0.016
 SBIN 0.027 0.022 0.029 0.020 0.025
SUNPHARMA 0.019 0.016 0.021 0.015 0.018
TCS 0.016 0.013 0.018 0.012 0.015
TATAMOTORS 0.028 0.023 0.030 0.021 0.025
TATASTEEL 0.029 0.024 0.031 0.022 0.027
WIPRO 0.019 0.016 0.021 0.015 0.018

A1 Optimisation
Weights
Stock Sector Weights
Energy Materials Industrials
ADANIPORTS Industrials -0.028 0.000 0.000 -0.028
ASIANPAINT Materials 0.026 0.000 0.026 0.000
AXISBANK Financials -0.036 0.000 0.000 0.000
BAJAJAUTO Con Disc 0.050 0.000 0.000 0.000
BHARTIARTL Telecom -0.017 0.000 0.000 0.000
CIPLA Health Care 0.046 0.000 0.000 0.000
COALINDIA Energy 0.033 0.033 0.000 0.000
DRREDDY Health Care 0.047 0.000 0.000 0.000
HDFCBANK Financials 0.153 0.000 0.000 0.000
HEROMOTOCO Cons Disc 0.030 0.000 0.000 0.000
HINDUNILVR Cons Staples 0.093 0.000 0.000 0.000
HDFC Financials 0.099 0.000 0.000 0.000
ICICIBANK Financials -0.025 0.000 0.000 0.000
INFY Info Tech -0.004 0.000 0.000 0.000
ITC Cons Staples 0.187 0.000 0.000 0.000
KOTAKBANK Financials 0.099 0.000 0.000 0.000
LT Industrials -0.025 0.000 0.000 -0.025
LUPIN Health Care 0.030 0.000 0.000 0.000
MAHM Cons Disc 0.057 0.000 0.000 0.000
MARUTI Cons Disc -0.033 0.000 0.000 0.000
NTPC Utilities 0.019 0.000 0.000 0.000
ONGC Energy -0.006 -0.006 0.000 0.000
POWERGRID Utilities 0.124 0.000 0.000 0.000
RELIANCE Energy 0.068 0.068 0.000 0.000
SBIN Financials -0.040 0.000 0.000 0.000
SUNPHARMA Health Care 0.028 0.000 0.000 0.000
TCS Info Tech 0.086 0.000 0.000 0.000
TATAMOTORS Cons Disc -0.042 0.000 0.000 0.000
TATASTEEL Materials -0.045 0.000 -0.045 0.000
WIPRO Info Tech 0.025 0.000 0.000 0.000
Total weight 1.000 0.094 -0.019 -0.053
Total positive weight
Total negative weight
Max stock wt
Max sector wt

Portfolio Variance Estimation

ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
Weights x Cov Matrix

Weights Transposed
Variance

Tracking Error Estimation

Month Rm-Rf Rp-Rf Rp-Rm
201204
201205
201206
201207
201208
201209
201210
201211
201212
201301
201302
201303
201304
201305
201306
201307
201308
201309
201310
201311
201312
201401
201402
201403
201404
201405
201406
201407
201408
201409
 201410
201411
201412
201501
201502
201503
201504
201505
201506
201507
201508
201509
201510
201511
201512
201601
201602
201603
201604
201605
201606
201607
201608
201609
201610
201611
201612
201701
201702
201703
Tracking Error

Factor tilt estimation

Factor Portfolio Benchmark Portfolio Tilt
Rm-Rf
SMB
HML
WML

A2 & Optimisation objectives and constraints

A3 Value & low-beta portfolio (long-only) 130/30 minimum variance portfolio
Objective Target Link for solver Objective Target
Tracking error Minimise Variance Minimise
Constraints Constraints
Total weight 1.000 Total weight 1.000
Max stock weight 0.150 Positive wt 1.300
Max sector weight 0.250
Rm-Rf tilt -0.200
SMB tilt 0.000
HML tilt 0.200
WML tilt 0.000

Optimised Portfolios
Stock Sector Weights
Value & low be 130/30 min var
ADANIPORTS Industrials
ASIANPAINT Materials
AXISBANK Financials
BAJAJAUTO Con Disc
BHARTIARTL Telecom
CIPLA Health Care
COALINDIA Energy
DRREDDY Health Care
HDFCBANK Financials
HEROMOTOCO Cons Disc
HINDUNILVR Cons Staples
HDFC Financials
ICICIBANK Financials
INFY Info Tech
ITC Cons Staples
KOTAKBANK Financials
LT Industrials
LUPIN Health Care
MAHM Cons Disc
MARUTI Cons Disc
NTPC Utilities
ONGC Energy
POWERGRID Utilities
RELIANCE Energy
SBIN Financials
SUNPHARMA Health Care
TCS Info Tech
TATAMOTORS Cons Disc
TATASTEEL Materials
WIPRO Info Tech
ovariance matrix of 30 stocks.
r and constraints in terms of weights (total, sector-wise,

with factor tilt of -0.2 on market factor (Rm-Rf) and +0.2 on

traints include max weight for a sector of 0.25 and max

CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC

0.017 0.021 -0.006 0.036 0.081 0.009 -0.006
-0.014 -0.095 -0.046 -0.074 -0.185 0.018 -0.035
0.015 0.073 -0.023 0.116 0.159 0.058 0.009
0.063 0.027 -0.028 0.036 -0.071 0.030 0.048
0.117 -0.025 0.037 0.006 -0.095 0.103 0.055
0.000 0.014 -0.029 0.050 0.045 0.044 0.048
-0.051 -0.043 0.060 0.003 -0.007 -0.001 -0.024
0.133 0.051 0.031 0.103 -0.033 -0.015 0.101
-0.006 -0.036 -0.003 -0.042 0.032 -0.032 -0.022
-0.024 -0.011 0.042 -0.059 -0.047 -0.106 -0.057
-0.120 -0.128 -0.088 -0.034 -0.092 -0.068 -0.040
0.047 0.022 -0.003 -0.008 -0.081 0.044 0.080
0.063 0.025 0.140 0.087 0.061 0.246 0.020
-0.094 0.013 0.027 0.020 0.045 0.009 0.044
0.051 -0.073 0.053 -0.043 -0.045 -0.018 -0.011
0.017 -0.078 0.030 -0.095 0.087 0.052 -0.091
0.037 -0.119 -0.004 -0.035 0.107 0.016 -0.111
0.028 0.188 0.031 -0.008 0.013 -0.010 0.055
-0.049 -0.033 0.023 0.137 0.027 -0.027 0.109
-0.062 -0.062 0.005 -0.034 -0.020 -0.031 -0.040
0.017 0.061 0.012 0.000 0.005 -0.047 -0.041
0.017 -0.064 0.021 -0.063 -0.058 -0.009 0.007
-0.071 -0.021 0.106 0.055 -0.009 -0.044 0.006
-0.009 0.173 -0.125 0.114 0.149 0.093 0.073
0.031 0.007 0.050 -0.047 -0.041 -0.067 0.009
-0.042 0.265 -0.102 0.099 0.061 0.053 -0.030
0.133 0.031 0.061 0.036 0.114 0.036 0.123
0.035 -0.050 0.073 0.008 0.006 0.099 0.085
0.126 -0.040 0.045 0.005 0.010 0.075 0.000
0.209 -0.050 0.086 0.027 0.082 -0.001 -0.027
0.060 0.076 -0.026 0.041 0.071 -0.008 0.045
-0.054 -0.045 0.134 0.044 0.021 0.060 0.043
-0.021 0.075 -0.106 -0.013 -0.019 -0.041 -0.029
0.106 -0.066 -0.009 0.124 -0.082 0.221 0.108
-0.027 0.085 0.028 -0.014 -0.072 -0.031 0.049
0.037 -0.036 0.034 -0.049 -0.022 -0.047 -0.024
-0.110 -0.004 -0.057 -0.039 -0.124 -0.033 -0.114
0.015 0.072 0.062 0.056 0.151 0.006 0.050
-0.059 0.069 -0.002 0.009 -0.060 0.071 0.043
0.144 0.037 0.145 0.042 0.053 -0.002 0.036
-0.042 -0.172 0.054 -0.081 -0.110 -0.071 -0.118
-0.070 -0.115 -0.042 0.034 -0.006 -0.062 0.015
0.076 -0.026 0.022 0.021 0.074 -0.011 0.031
-0.072 0.029 -0.277 -0.024 0.040 0.004 -0.037
0.002 -0.012 -0.008 0.000 -0.009 0.059 0.031
-0.103 -0.031 -0.005 -0.036 -0.054 -0.058 -0.072
-0.125 -0.032 -0.028 -0.077 -0.029 0.012 -0.103
-0.010 0.021 -0.004 0.096 0.189 0.043 0.039
0.044 -0.022 0.013 0.052 -0.019 -0.008 -0.020
-0.126 0.010 0.025 0.038 0.062 -0.025 0.132
0.056 0.068 0.057 -0.002 0.021 0.063 0.005
0.048 0.042 -0.127 0.054 0.003 0.020 0.104
0.079 0.012 0.047 0.031 0.101 -0.011 0.018
0.012 -0.038 0.001 -0.019 -0.034 -0.058 -0.014
-0.015 0.001 0.078 -0.016 -0.024 -0.039 -0.008
-0.019 -0.055 -0.055 -0.052 -0.059 0.011 -0.094
-0.002 -0.032 -0.048 0.000 -0.044 -0.027 -0.007
0.006 0.028 -0.019 0.062 0.039 0.030 0.077
0.011 0.034 -0.060 0.076 -0.018 0.007 -0.003
0.011 -0.034 -0.081 0.033 0.040 0.047 0.095
CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC
0.018 0.019 0.018 0.014 0.019 0.016 0.016
0.015 0.016 0.015 0.012 0.016 0.013 0.013
0.020 0.020 0.019 0.015 0.021 0.017 0.017
0.014 0.014 0.014 0.011 0.014 0.012 0.012
0.017 0.017 0.017 0.013 0.018 0.015 0.014
0.060 0.015 0.014 0.011 0.015 0.012 0.012
0.015 0.065 0.014 0.011 0.015 0.013 0.013
0.014 0.014 0.059 0.011 0.015 0.012 0.012
0.011 0.011 0.011 0.037 0.011 0.010 0.009
0.015 0.015 0.015 0.011 0.066 0.013 0.013
0.012 0.013 0.012 0.010 0.013 0.046 0.011
0.012 0.013 0.012 0.009 0.013 0.011 0.045
0.018 0.018 0.018 0.014 0.019 0.015 0.015
0.016 0.016 0.015 0.012 0.016 0.014 0.013
0.010 0.011 0.010 0.008 0.011 0.009 0.009
0.012 0.013 0.012 0.009 0.013 0.011 0.010
0.018 0.018 0.017 0.014 0.018 0.015 0.015
0.015 0.015 0.015 0.011 0.015 0.013 0.013
0.013 0.014 0.013 0.011 0.014 0.012 0.012
0.019 0.020 0.019 0.015 0.020 0.017 0.016
0.015 0.016 0.015 0.012 0.016 0.013 0.013
0.016 0.016 0.016 0.012 0.017 0.014 0.014
0.011 0.012 0.011 0.009 0.012 0.010 0.010
0.013 0.014 0.013 0.010 0.014 0.011 0.011
 0.021 0.021 0.020 0.016 0.022 0.018 0.018
0.015 0.015 0.015 0.012 0.015 0.013 0.013
0.012 0.013 0.012 0.010 0.013 0.011 0.011
0.021 0.022 0.021 0.017 0.022 0.019 0.018
0.022 0.023 0.022 0.017 0.023 0.020 0.019
0.015 0.016 0.015 0.012 0.016 0.013 0.013

Sector Weights
Cons Disc Cons Staples Health Care Financials Info Tech Telecom Utilities
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 -0.036 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 -0.017 0.000
0.000 0.000 0.046 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.047 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.153 0.000 0.000 0.000
0.030 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.093 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.099 0.000 0.000 0.000
0.000 0.000 0.000 -0.025 0.000 0.000 0.000
0.000 0.000 0.000 0.000 -0.004 0.000 0.000
0.000 0.187 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.099 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.030 0.000 0.000 0.000 0.000
0.057 0.000 0.000 0.000 0.000 0.000 0.000
-0.033 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.019
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.124
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 -0.040 0.000 0.000 0.000
0.000 0.000 0.028 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.086 0.000 0.000
-0.042 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.025 0.000 0.000
0.012 0.280 0.152 0.250 0.107 -0.017 0.142
CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC
ariance portfolio 1. Set up portfolio optimisation objectives in terms of portfolio variance and tracking error and
Link for solver stock-wise) and factor tilt.
2. Form a buy-only portfolio which minimises the tracking error vis-à-vis the index with factor ti
value/growth (HML) factor, but is neutral on size and momentum factors. Additional constraints
weight for a stock of 0.15.
3. Construct a 130/30 extension strategy with objective to minimise the portfolio variance.
ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM
-0.013 -0.147 0.076 0.068 -0.068 0.035 0.012
-0.024 0.002 -0.069 -0.043 -0.051 -0.030 -0.089
0.140 0.019 0.139 0.047 0.185 -0.007 0.078
0.061 -0.117 -0.012 -0.102 -0.027 0.115 0.001
-0.060 0.059 0.032 0.076 -0.011 -0.020 0.086
0.156 0.061 0.010 0.111 0.184 -0.001 0.124
-0.013 -0.062 0.034 -0.074 0.011 -0.056 0.016
0.040 0.025 0.048 0.101 0.020 0.036 0.062
0.029 -0.055 -0.045 -0.035 -0.043 0.032 -0.022
0.040 0.196 0.065 0.037 -0.046 -0.022 -0.050
-0.133 0.036 -0.046 -0.036 -0.121 -0.038 -0.028
-0.001 -0.011 0.042 -0.016 -0.007 0.069 -0.017
0.107 -0.233 0.058 0.077 0.102 0.109 0.066
0.070 0.096 0.043 0.103 -0.080 0.048 0.039
-0.079 0.030 -0.051 -0.084 -0.004 0.048 -0.004
-0.157 0.183 0.046 -0.104 -0.103 0.116 -0.050
-0.124 0.036 -0.107 0.004 -0.142 -0.090 -0.152
0.092 -0.036 0.097 0.020 0.084 0.060 0.052
0.259 0.103 -0.025 0.101 0.226 0.031 0.066
-0.054 0.007 -0.049 0.001 0.066 -0.042 0.058
0.022 0.032 -0.003 -0.043 0.018 0.055 -0.009
-0.108 0.054 0.003 -0.107 -0.087 -0.037 -0.064
0.049 0.026 0.001 0.033 0.118 0.123 0.087
0.186 -0.149 0.070 0.131 0.141 -0.065 0.000
-0.007 -0.037 -0.041 0.026 0.012 0.052 0.087
0.132 -0.054 -0.005 0.073 0.188 -0.061 0.141
0.072 0.097 -0.038 0.013 0.092 0.113 -0.074
0.031 0.029 0.089 0.071 -0.123 0.123 0.054
0.050 0.062 -0.009 0.080 0.019 0.082 0.162
-0.085 0.035 0.037 -0.029 -0.053 0.077 -0.039
0.127 0.092 -0.048 0.098 0.130 -0.024 -0.049
0.074 0.070 0.016 0.069 -0.015 0.076 0.010
-0.001 -0.103 0.008 0.044 -0.095 -0.043 -0.074
0.016 0.080 -0.006 0.039 0.129 0.103 0.016
-0.050 0.065 -0.026 0.052 0.033 0.096 0.016
-0.094 -0.041 -0.106 -0.067 -0.034 0.142 -0.088
0.045 -0.130 -0.016 0.010 -0.056 -0.123 -0.041
-0.048 0.035 0.008 0.044 0.008 0.027 0.094
-0.019 0.028 -0.013 -0.014 0.070 0.023 0.010
-0.025 0.087 0.029 -0.004 -0.003 -0.104 0.066
-0.087 0.010 -0.009 -0.070 -0.100 0.132 -0.108
-0.034 0.054 0.005 -0.009 -0.083 0.048 0.025
0.019 -0.018 0.012 0.056 -0.043 -0.058 -0.068
-0.016 -0.047 0.020 0.000 -0.032 -0.075 0.151
-0.052 0.009 -0.052 0.032 -0.078 0.020 -0.076
-0.125 0.050 -0.030 -0.055 -0.141 -0.074 -0.036
-0.179 -0.074 -0.078 -0.081 -0.025 0.020 -0.009
0.240 0.119 0.104 0.075 0.122 -0.160 -0.019
-0.005 -0.011 -0.015 0.046 0.026 0.082 0.096
0.031 0.026 0.107 0.038 0.170 -0.088 -0.011
-0.004 -0.058 0.041 0.016 0.009 0.038 0.073
0.089 -0.088 0.024 -0.006 0.036 0.130 0.030
-0.025 -0.040 0.024 0.053 -0.016 -0.154 -0.025
-0.026 -0.004 -0.076 -0.040 -0.059 -0.002 -0.027
0.094 -0.034 -0.001 0.044 0.028 -0.003 -0.072
-0.049 -0.027 -0.045 -0.079 -0.070 0.006 -0.100
-0.042 0.031 0.029 -0.054 -0.029 -0.017 -0.006
0.049 -0.086 0.066 0.069 0.066 -0.016 0.041
0.023 0.085 0.011 0.032 0.013 -0.002 0.050
-0.003 0.003 0.065 0.084 0.068 -0.025 -0.022
ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM
0.023 0.020 0.013 0.016 0.023 0.019 0.017
0.019 0.017 0.011 0.013 0.019 0.016 0.014
0.025 0.022 0.015 0.017 0.025 0.021 0.019
0.017 0.015 0.010 0.012 0.017 0.014 0.013
0.021 0.019 0.012 0.014 0.021 0.018 0.016
0.018 0.016 0.010 0.012 0.018 0.015 0.013
0.018 0.016 0.011 0.013 0.018 0.015 0.014
0.018 0.015 0.010 0.012 0.017 0.015 0.013
0.014 0.012 0.008 0.009 0.014 0.011 0.011
0.019 0.016 0.011 0.013 0.018 0.015 0.014
0.015 0.014 0.009 0.011 0.015 0.013 0.012
0.015 0.013 0.009 0.010 0.015 0.013 0.012
0.096 0.020 0.013 0.015 0.022 0.019 0.017
0.020 0.075 0.011 0.013 0.020 0.016 0.015
0.013 0.011 0.033 0.009 0.013 0.011 0.010
0.015 0.013 0.009 0.045 0.015 0.013 0.012
0.022 0.020 0.013 0.015 0.095 0.018 0.017
0.019 0.016 0.011 0.013 0.018 0.066 0.014
0.017 0.015 0.010 0.012 0.017 0.014 0.056
0.024 0.021 0.014 0.016 0.024 0.020 0.018
0.019 0.017 0.011 0.013 0.019 0.016 0.015
0.020 0.018 0.012 0.014 0.020 0.017 0.015
0.015 0.013 0.008 0.010 0.014 0.012 0.011
0.017 0.015 0.010 0.011 0.016 0.014 0.013
 0.026 0.023 0.015 0.018 0.026 0.022 0.020
0.019 0.016 0.011 0.013 0.019 0.016 0.014
0.016 0.014 0.009 0.011 0.016 0.013 0.012
0.027 0.024 0.016 0.018 0.027 0.022 0.020
0.028 0.025 0.016 0.019 0.028 0.023 0.021
0.019 0.017 0.011 0.013 0.019 0.016 0.014

Real estate
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM
ance and tracking error and constraints in terms of weights (total, sector-wise,

-à-vis the index with factor tilt of -0.2 on market factor (Rm-Rf) and +0.2 on
actors. Additional constraints include max weight for a sector of 0.25 and max

e the portfolio variance.

MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
0.009 -0.008 0.002 0.024 -0.011 0.014 0.051
-0.199 -0.103 -0.066 -0.051 -0.048 0.125 -0.065
0.051 0.081 0.115 0.060 0.038 0.044 0.113
-0.038 -0.024 -0.003 0.038 0.000 -0.078 0.019
0.005 0.063 -0.040 0.006 0.033 -0.087 0.032
0.179 -0.005 0.016 0.007 0.078 0.207 0.031
0.057 -0.022 -0.050 -0.059 -0.044 -0.064 -0.006
0.020 -0.025 -0.019 0.028 -0.020 0.022 0.017
0.004 -0.041 0.023 -0.036 0.051 0.092 0.030
0.056 -0.006 0.263 -0.045 0.049 0.015 -0.031
-0.149 -0.044 -0.084 -0.046 -0.087 -0.150 0.111
-0.063 -0.040 0.002 0.011 -0.056 -0.012 0.014
0.298 0.102 0.043 0.053 0.013 0.086 0.156
-0.044 -0.026 -0.007 0.005 0.027 0.074 0.092
-0.048 -0.075 0.004 -0.028 0.064 -0.052 -0.041
-0.144 -0.098 -0.126 -0.099 0.004 -0.132 0.111
-0.066 -0.007 -0.152 -0.043 -0.032 -0.123 -0.087
0.083 0.132 0.068 0.012 -0.043 0.058 0.137
0.196 -0.004 0.088 0.023 0.102 0.104 0.019
0.020 -0.016 0.011 -0.067 -0.072 0.008 -0.066
0.044 -0.079 -0.024 0.041 0.042 -0.038 -0.015
-0.080 -0.055 -0.053 -0.049 -0.079 -0.144 0.028
-0.037 -0.116 0.052 -0.016 -0.045 -0.003 0.086
0.235 0.058 0.100 0.118 0.156 0.357 -0.115
-0.033 -0.037 0.016 0.001 0.000 0.078 0.095
0.176 0.368 0.154 0.144 0.142 0.286 -0.045
0.067 -0.032 0.113 0.136 -0.054 0.050 0.123
0.028 -0.077 -0.074 -0.053 -0.016 -0.099 0.145
0.101 -0.045 0.094 -0.032 -0.013 0.002 0.074
0.093 0.000 -0.067 0.049 -0.061 -0.015 -0.002
0.084 0.076 -0.016 0.068 0.051 0.100 -0.020
-0.006 -0.055 -0.069 -0.027 -0.014 0.184 -0.013
-0.009 0.003 -0.095 -0.036 -0.108 -0.037 -0.023
0.088 -0.009 0.023 0.065 0.020 -0.013 0.102
-0.014 0.082 -0.082 0.054 -0.060 -0.033 -0.012
0.016 -0.061 -0.051 -0.077 -0.055 -0.121 0.115
0.003 0.014 -0.013 -0.026 0.040 0.006 -0.087
0.008 -0.097 0.077 0.004 0.022 0.037 0.022
0.056 0.001 -0.068 -0.039 0.134 -0.062 -0.101
0.070 -0.028 -0.125 0.011 -0.006 0.022 -0.066
-0.038 -0.106 -0.128 -0.083 -0.151 -0.092 0.085
0.119 0.030 -0.047 0.017 -0.001 -0.046 -0.038
-0.057 0.067 0.074 -0.031 0.096 -0.006 0.022
0.024 -0.018 -0.043 0.051 0.016 0.051 -0.183
0.002 0.108 0.026 0.032 0.040 -0.110 0.116
-0.117 -0.030 -0.070 0.040 0.017 -0.203 0.060
-0.213 -0.152 -0.146 -0.118 -0.070 -0.124 -0.025
0.142 0.071 0.105 0.064 0.088 0.222 -0.047
0.016 0.073 0.010 0.026 -0.065 -0.032 -0.015
0.091 0.026 -0.037 0.040 -0.030 0.078 -0.066
0.000 0.086 0.019 0.081 0.005 0.062 -0.005
0.131 0.008 0.012 0.074 0.042 0.042 0.082
0.064 -0.001 0.094 0.040 0.036 0.097 -0.072
0.079 -0.062 0.078 -0.039 0.018 -0.012 -0.045
0.068 0.021 0.117 -0.007 -0.031 0.024 -0.003
-0.109 0.067 0.024 0.086 -0.063 -0.003 -0.050
0.005 0.004 -0.012 -0.050 0.083 -0.039 -0.119
0.103 0.044 0.051 0.121 -0.039 0.036 -0.002
0.000 -0.046 -0.037 -0.070 0.182 0.031 0.070
0.011 0.012 -0.048 0.022 0.060 0.082 0.008
MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
0.025 0.020 0.020 0.015 0.017 0.027 0.019
0.020 0.016 0.017 0.012 0.014 0.022 0.016
0.027 0.022 0.022 0.016 0.018 0.029 0.021
0.019 0.015 0.015 0.011 0.013 0.020 0.015
0.023 0.018 0.019 0.014 0.016 0.025 0.018
0.019 0.015 0.016 0.011 0.013 0.021 0.015
0.020 0.016 0.016 0.012 0.014 0.021 0.015
0.019 0.015 0.016 0.011 0.013 0.020 0.015
0.015 0.012 0.012 0.009 0.010 0.016 0.012
0.020 0.016 0.017 0.012 0.014 0.022 0.015
0.017 0.013 0.014 0.010 0.011 0.018 0.013
0.016 0.013 0.014 0.010 0.011 0.018 0.013
0.024 0.019 0.020 0.015 0.017 0.026 0.019
0.021 0.017 0.018 0.013 0.015 0.023 0.016
0.014 0.011 0.012 0.008 0.010 0.015 0.011
0.016 0.013 0.014 0.010 0.011 0.018 0.013
0.024 0.019 0.020 0.014 0.016 0.026 0.019
0.020 0.016 0.017 0.012 0.014 0.022 0.016
0.018 0.015 0.015 0.011 0.013 0.020 0.014
0.111 0.021 0.021 0.016 0.018 0.028 0.020
0.021 0.073 0.017 0.013 0.014 0.023 0.016
0.021 0.017 0.076 0.013 0.015 0.023 0.017
0.016 0.013 0.013 0.041 0.011 0.017 0.012
0.018 0.014 0.015 0.011 0.053 0.019 0.014
0.028 0.023 0.023 0.017 0.019 0.131 0.022
0.020 0.016 0.017 0.012 0.014 0.022 0.067
0.017 0.014 0.014 0.010 0.012 0.018 0.013
0.029 0.023 0.024 0.018 0.020 0.031 0.023
0.030 0.024 0.025 0.018 0.021 0.033 0.024
0.020 0.016 0.017 0.012 0.014 0.022 0.016
MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
 TCS TATAMOTORS TATASTEEL WIPRO Rm-Rf
0.059 0.142 -0.021 -0.084 -0.012
-0.006 -0.271 -0.138 0.004 -0.071
0.025 0.031 0.089 -0.022 0.068
-0.033 -0.057 -0.042 -0.156 -0.018
0.079 0.028 -0.130 0.075 0.005
-0.046 0.138 0.099 0.031 0.070
0.011 -0.054 -0.028 -0.087 -0.020
-0.007 0.071 -0.024 0.114 0.039
-0.048 0.133 0.105 -0.003 -0.002
0.062 -0.053 -0.062 0.041 0.017
0.122 -0.042 -0.160 0.007 -0.058
0.032 -0.069 -0.094 0.044 -0.007
-0.130 0.106 -0.036 -0.210 0.029
0.083 0.040 -0.043 -0.068 0.007
0.016 -0.108 -0.067 0.081 -0.024
0.191 0.032 -0.195 0.243 -0.010
0.106 0.019 0.263 0.098 -0.046
-0.056 0.104 -0.018 -0.029 0.033
0.089 0.137 0.224 -0.001 0.085
-0.056 0.042 0.192 -0.019 -0.024
0.076 -0.063 0.049 0.180 0.011
0.024 -0.078 -0.167 0.026 -0.039
0.010 0.185 -0.041 0.031 0.023
-0.071 -0.052 0.137 -0.098 0.053
0.023 0.034 0.011 -0.044 -0.005
-0.028 -0.005 0.179 -0.040 0.073
0.132 0.031 0.105 0.072 0.042
0.060 0.034 0.061 0.000 0.012
-0.027 0.167 -0.078 0.034 0.022
0.077 -0.049 -0.113 0.047 -0.008
-0.053 0.060 0.060 -0.061 0.041
0.009 -0.011 -0.039 0.033 0.024
-0.040 -0.076 -0.163 -0.061 -0.049
-0.034 0.172 -0.029 0.097 0.054
 0.072 0.008 -0.096 0.081 0.000
-0.055 -0.080 -0.116 -0.054 -0.055
-0.037 -0.081 0.132 -0.148 -0.040
0.052 -0.059 -0.095 0.037 0.024
-0.020 -0.104 -0.079 -0.038 -0.008
-0.021 -0.122 -0.171 0.052 0.005
0.016 -0.121 -0.096 -0.002 -0.071
0.003 -0.128 -0.064 0.039 -0.011
-0.038 0.283 0.159 -0.045 0.014
-0.058 0.096 -0.073 -0.006 -0.024
0.025 -0.082 0.122 -0.029 -0.007
-0.022 -0.144 -0.042 0.007 -0.053
-0.092 -0.113 -0.008 -0.078 -0.079
0.148 0.282 0.278 0.079 0.097
0.001 0.054 0.092 -0.022 0.006
0.012 0.115 -0.052 -0.019 0.036
-0.005 -0.004 -0.043 0.016 0.007
0.024 0.091 0.122 -0.025 0.034
-0.046 0.063 0.039 -0.106 0.009
-0.039 -0.010 0.006 -0.031 -0.026
-0.014 -0.003 0.076 -0.038 -0.002
-0.056 -0.148 0.021 0.002 -0.051
0.032 0.021 -0.063 0.014 -0.006
-0.058 0.106 0.177 -0.041 0.034
0.102 -0.133 0.039 0.074 0.035
-0.019 0.016 -0.005 0.050 0.025
TCS TATAMOTORS TATASTEEL WIPRO
0.016 0.028 0.029 0.019
0.013 0.023 0.024 0.016
0.018 0.030 0.031 0.021
0.012 0.021 0.022 0.015
0.015 0.025 0.027 0.018
0.012 0.021 0.022 0.015
0.013 0.022 0.023 0.016
0.012 0.021 0.022 0.015
0.010 0.017 0.017 0.012
0.013 0.022 0.023 0.016
0.011 0.019 0.020 0.013
0.011 0.018 0.019 0.013
0.016 0.027 0.028 0.019
0.014 0.024 0.025 0.017
0.009 0.016 0.016 0.011
0.011 0.018 0.019 0.013
0.016 0.027 0.028 0.019
0.013 0.022 0.023 0.016
0.012 0.020 0.021 0.014
0.017 0.029 0.030 0.020
0.014 0.023 0.024 0.016
0.014 0.024 0.025 0.017
0.010 0.018 0.018 0.012
0.012 0.020 0.021 0.014
0.018 0.031 0.033 0.022
0.013 0.023 0.024 0.016
0.048 0.019 0.020 0.013
0.019 0.140 0.034 0.023
0.020 0.034 0.153 0.024
0.013 0.023 0.024 0.069
TCS TATAMOTORS TATASTEEL WIPRO

Err:504
You are provided with historical excess returns (Ri-Rf), the four factor beta and variance-covariance matrix of 30 stocks.
1. Set up portfolio optimisation objectives in terms of portfolio variance and tracking error and constraints in terms of we
stock-wise) and factor tilt.
2. Form a buy-only portfolio which minimises the tracking error vis-à-vis the market index with factor tilt of -0.2 on mark
value/growth (HML) factor, but is neutral on size and momentum factors. Additional constraints include max weight for a
weight for a stock of 0.15.
3. Construct a 130/30 extension strategy with objective to minimise the portfolio variance.

Dataset 1: Excess Returns (Ri-Rf)

MONTH ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
201204 -0.019 0.081 -0.041 -0.039 -0.085
201205 -0.042 0.138 -0.129 -0.075 -0.034
201206 -0.021 0.032 0.121 0.032 0.003
201207 -0.011 -0.070 0.019 0.041 -0.023
201208 -0.068 -0.002 -0.048 0.002 -0.185
201209 0.124 0.071 0.131 0.128 0.072
201210 -0.012 0.000 0.035 -0.017 0.009
201211 0.018 0.112 0.106 0.058 0.247
201212 0.035 0.015 0.024 0.098 -0.067
201301 0.104 0.011 0.102 -0.056 0.064
201302 -0.083 -0.053 -0.114 -0.034 -0.053
201303 -0.004 0.139 -0.037 -0.096 -0.104
201304 0.039 -0.053 0.141 0.042 0.086
201305 0.040 0.032 -0.048 -0.038 -0.061
201306 -0.020 0.021 -0.081 0.046 -0.036
201307 -0.164 0.088 -0.171 0.026 0.176
201308 -0.007 -0.183 -0.201 -0.058 -0.143
201309 0.095 0.089 0.197 0.073 0.058
201310 0.045 0.167 0.207 0.064 0.138
201311 0.078 -0.072 -0.062 -0.079 -0.109
201312 -0.024 -0.032 0.118 -0.040 0.003
201401 -0.064 -0.045 -0.146 -0.012 -0.054
201402 0.135 -0.005 0.124 0.014 -0.094
201403 0.114 0.148 0.146 0.062 0.102
201404 -0.002 -0.082 0.034 -0.085 0.021
201405 0.192 0.001 0.202 0.014 0.043
201406 0.071 0.166 0.094 0.177 -0.028
201407 0.067 0.054 0.012 -0.089 0.099
201408 0.079 -0.014 0.008 0.081 -0.009
201409 -0.025 0.004 -0.056 0.032 0.086
201410 0.018 0.037 0.155 0.105 -0.021
201411 0.014 0.128 0.091 0.006 -0.047
201412 0.090 0.004 0.037 -0.083 -0.083
201501 0.063 0.134 0.166 -0.027 0.050
201502 -0.036 -0.052 0.036 -0.102 -0.048
201503 -0.075 -0.018 -0.093 -0.074 0.096
201504 0.025 -0.062 0.007 -0.039 -0.037
201505 0.016 0.025 0.025 0.181 0.108
201506 -0.055 -0.042 -0.052 0.089 -0.019
201507 0.046 0.162 0.029 0.007 -0.010
201508 0.088 -0.043 -0.123 -0.111 -0.154
201509 -0.161 -0.015 -0.028 0.019 -0.052
201510 -0.018 -0.018 -0.047 0.098 0.026
201511 -0.098 0.009 -0.018 -0.032 -0.046
201512 -0.034 0.046 -0.047 0.015 0.010
201601 -0.189 -0.022 -0.097 -0.081 -0.153
201602 -0.082 -0.028 -0.085 -0.065 0.089
201603 0.264 0.019 0.180 0.113 0.103
201604 -0.043 -0.006 0.057 0.028 0.032
201605 -0.197 0.128 0.086 0.048 -0.039
201606 0.067 0.020 0.029 0.020 0.035
201607 0.117 0.106 0.028 0.001 -0.016
201608 0.127 0.034 0.085 0.098 -0.085
201609 -0.028 -0.003 -0.095 -0.055 -0.059
201610 0.191 -0.084 -0.107 -0.004 0.010
201611 -0.100 -0.096 -0.040 -0.058 0.013
201612 -0.040 -0.086 -0.047 -0.024 -0.064
201701 0.089 0.084 0.030 0.072 0.134
201702 0.024 0.051 0.082 -0.033 0.045
201703 0.121 0.041 -0.035 0.013 -0.047

Dataset 2: Beta estimates

Stocks GICS Sector Beta Estimates
Rm-Rf SMB HML WML
ADANIPORTS Industrials 1.068 0.120 0.095 -0.180
ASIANPAINT Materials 1.231 -0.084 -0.053 0.529
AXISBANK Financials 1.843 -0.273 0.115 -0.214
BAJAJAUTO Con Disc 1.135 0.042 0.122 0.224
BHARTIARTL Telecom 0.590 -0.576 0.359 -0.129
CIPLA Health Care 0.485 0.415 0.395 0.385
COALINDIA Energy 0.721 0.080 0.227 -0.302
DRREDDY Health Care 0.345 0.192 0.083 0.438
HDFCBANK Financials 1.161 0.033 -0.014 -0.041
HEROMOTOCO Cons Disc 0.991 0.074 0.031 -0.187
HINDUNILVR Cons Staples 0.531 -0.372 0.171 0.147
HDFC Financials 1.328 0.118 -0.153 0.334
ICICIBANK Financials 1.702 -0.113 0.072 -0.186
INFY Info Tech 0.941 0.162 -0.534 0.371
ITC Cons Staples 0.821 -0.148 -0.081 0.128
KOTAKBANK Financials 1.024 -0.018 -0.082 -0.240
LT Industrials 1.712 0.040 0.046 -0.112
LUPIN Health Care 0.127 -0.139 0.047 0.385
MAHM Cons Disc 0.819 0.198 0.077 -0.053
MARUTI Cons Disc 1.553 0.305 0.202 -0.255
NTPC Utilities 0.447 0.102 0.428 -0.405
ONGC Energy 1.018 -0.097 0.171 -0.122
POWERGRID Utilities 0.647 0.161 0.371 0.019
RELIANCE Energy 0.848 -0.091 -0.015 -0.210
SBIN Financials 1.343 -0.109 0.392 -0.353
SUNPHARMA Health Care 0.438 -0.303 -0.042 0.366
TCS Info Tech 0.513 0.270 -0.218 0.287
TATAMOTORS Cons Disc 1.635 -0.043 -0.042 -0.152
TATASTEEL Materials 0.647 0.035 0.244 -1.057
WIPRO Info Tech 0.504 0.183 -0.097 0.351
S&P BSE30 INDEX 1.000 0.000 0.000 0.000

Dataset 3: Covariance Matrix

ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
ADANIPORTS 0.101 0.019 0.025 0.018 0.022
ASIANPAINT 0.019 0.069 0.021 0.015 0.018
AXISBANK 0.025 0.021 0.119 0.019 0.023
BAJAJAUTO 0.018 0.015 0.019 0.058 0.016
BHARTIARTL 0.022 0.018 0.023 0.016 0.086
CIPLA 0.018 0.015 0.020 0.014 0.017
COALINDIA 0.019 0.016 0.020 0.014 0.017
DRREDDY 0.018 0.015 0.019 0.014 0.017
HDFCBANK 0.014 0.012 0.015 0.011 0.013
HEROMOTOCO 0.019 0.016 0.021 0.014 0.018
HINDUNILVR 0.016 0.013 0.017 0.012 0.015
HDFC 0.016 0.013 0.017 0.012 0.014
ICICIBANK 0.023 0.019 0.025 0.017 0.021
INFY 0.020 0.017 0.022 0.015 0.019
ITC 0.013 0.011 0.015 0.010 0.012
KOTAKBANK 0.016 0.013 0.017 0.012 0.014
LT 0.023 0.019 0.025 0.017 0.021
LUPIN 0.019 0.016 0.021 0.014 0.018
MAHM 0.017 0.014 0.019 0.013 0.016
MARUTI 0.025 0.020 0.027 0.019 0.023
NTPC 0.020 0.016 0.022 0.015 0.018
ONGC 0.020 0.017 0.022 0.015 0.019
POWERGRID 0.015 0.012 0.016 0.011 0.014
RELIANCE 0.017 0.014 0.018 0.013 0.016
SBIN 0.027 0.022 0.029 0.020 0.025
SUNPHARMA 0.019 0.016 0.021 0.015 0.018
TCS 0.016 0.013 0.018 0.012 0.015
TATAMOTORS 0.028 0.023 0.030 0.021 0.025
TATASTEEL 0.029 0.024 0.031 0.022 0.027
WIPRO 0.019 0.016 0.021 0.015 0.018
A1 Optimisation
Weights
Stock Sector Weights
Energy Materials Industrials
ADANIPORTS Industrials -0.029 0.000 0.000 -0.029
ASIANPAINT Materials 0.025 0.000 0.025 0.000
AXISBANK Financials -0.037 0.000 0.000 0.000
BAJAJAUTO Con Disc 0.049 0.000 0.000 0.000
BHARTIARTL Telecom -0.019 0.000 0.000 0.000
CIPLA Health Care 0.044 0.000 0.000 0.000
COALINDIA Energy 0.031 0.031 0.000 0.000
DRREDDY Health Care 0.046 0.000 0.000 0.000
HDFCBANK Financials 0.151 0.000 0.000 0.000
HEROMOTOCO Cons Disc 0.029 0.000 0.000 0.000
HINDUNILVR Cons Staples 0.092 0.000 0.000 0.000
HDFC Financials 0.097 0.000 0.000 0.000
ICICIBANK Financials -0.026 0.000 0.000 0.000
INFY Info Tech 0.014 0.000 0.000 0.000
ITC Cons Staples 0.185 0.000 0.000 0.000
KOTAKBANK Financials 0.098 0.000 0.000 0.000
LT Industrials -0.026 0.000 0.000 -0.026
LUPIN Health Care 0.029 0.000 0.000 0.000
MAHM Cons Disc 0.055 0.000 0.000 0.000
MARUTI Cons Disc -0.034 0.000 0.000 0.000
NTPC Utilities 0.018 0.000 0.000 0.000
ONGC Energy 0.012 0.012 0.000 0.000
POWERGRID Utilities 0.122 0.000 0.000 0.000
RELIANCE Energy 0.066 0.066 0.000 0.000
SBIN Financials -0.041 0.000 0.000 0.000
SUNPHARMA Health Care 0.027 0.000 0.000 0.000
TCS Info Tech 0.085 0.000 0.000 0.000
TATAMOTORS Cons Disc -0.043 0.000 0.000 0.000
TATASTEEL Materials -0.045 0.000 -0.045 0.000
WIPRO Info Tech 0.024 0.000 0.000 0.000
Total weight 1.000 0.109 -0.021 -0.055
Total positive weight 1.300
Total negative weight -0.300
Max stock wt 0.185
Max sector wt 0.277

Portfolio Variance Estimation

ADANIPORTS ASIANPAINT AXISBANK BAJAJAUTO BHARTIARTL
Weights x Cov Matrix 0.011 0.012 0.011 0.012 0.011
Weights Transposed -0.029 0.025 -0.037 0.049 -0.019
Variance 0.013 using sumproduct
Alternatively 0.013 using matrix multiplication

Tracking Error Estimation

Month Rm-Rf Rp-Rf Rp-Rm
201204 -0.012 0.036 0.047
201205 -0.071 -0.033 0.037
201206 0.068 0.063 -0.005
201207 -0.018 0.009 0.027
201208 0.005 0.067 0.063
201209 0.070 0.005 -0.065
201210 -0.020 -0.016 0.005
201211 0.039 0.051 0.012
201212 -0.002 -0.039 -0.037
201301 0.017 -0.011 -0.028
201302 -0.058 -0.014 0.045
201303 -0.007 0.031 0.038
201304 0.029 0.040 0.010
201305 0.007 0.039 0.033
201306 -0.024 -0.002 0.022
201307 -0.010 0.031 0.041
201308 -0.046 -0.040 0.006
201309 0.033 0.017 -0.015
201310 0.085 0.013 -0.071
201311 -0.024 -0.059 -0.035
201312 0.011 0.001 -0.010
201401 -0.039 -0.003 0.035
201402 0.023 0.000 -0.023
201403 0.053 0.035 -0.018
201404 -0.005 -0.018 -0.013
201405 0.073 0.015 -0.058
201406 0.042 0.052 0.009
201407 0.012 0.046 0.034
201408 0.022 0.021 -0.001
201409 -0.008 0.040 0.047
201410 0.041 0.002 -0.039
201411 0.024 0.022 -0.002
201412 -0.049 -0.023 0.025
201501 0.054 0.049 -0.005
201502 0.000 0.017 0.017
201503 -0.055 -0.041 0.013
201504 -0.040 -0.057 -0.017
201505 0.024 0.056 0.032
201506 -0.008 0.020 0.028
201507 0.005 0.041 0.036
201508 -0.071 -0.051 0.021
 201509 -0.011 0.014 0.025
201510 0.014 0.003 -0.010
201511 -0.024 -0.015 0.010
201512 -0.007 0.021 0.029
201601 -0.053 0.000 0.053
201602 -0.079 -0.064 0.016
201603 0.097 0.021 -0.075
201604 0.006 0.009 0.003
201605 0.036 0.031 -0.005
201606 0.007 0.036 0.030
201607 0.034 0.021 -0.013
201608 0.009 0.008 0.000
201609 -0.026 -0.037 -0.011
201610 -0.002 -0.022 -0.020
201611 -0.051 -0.032 0.019
201612 -0.006 -0.003 0.003
201701 0.034 0.027 -0.007
201702 0.035 0.031 -0.004
201703 0.025 0.034 0.009
Tracking Error 0.031

Factor tilt estimation

Factor Portfolio Benchmark Portfolio Tilt Since benchmark is market index, i
Rm-Rf 0.659 1 -0.341
SMB 0.041 0 0.041
HML -0.009 0 -0.009
WML 0.223 0 0.223

A2 & Optimisation objectives and constraints

A3 Value & low-beta portfolio (long-only) 130/30 minimum variance portfolio
Objective Target Link for solver Objective Target
Tracking error Minimise 0.031 Variance Minimise
Constraints Constraints
Total weight 1.000 1.000 Total weight 1.000
Max stock weight 0.150 0.185 Positive wt 1.300
Max sector weight 0.250 0.277
Rm-Rf tilt -0.200 -0.341
SMB tilt 0.000 0.041
HML tilt 0.200 -0.009
WML tilt 0.000 0.223

Optimised Portfolios
Stock Sector Weights
Value & low be 130/30 min var
ADANIPORTS Industrials 0.000 -0.029
ASIANPAINT Materials 0.002 0.025
AXISBANK Financials 0.017 -0.037
BAJAJAUTO Con Disc 0.031 0.049
BHARTIARTL Telecom 0.089 -0.019
CIPLA Health Care 0.070 0.044
COALINDIA Energy 0.000 0.031
DRREDDY Health Care 0.077 0.046
HDFCBANK Financials 0.000 0.151
HEROMOTOCO Cons Disc 0.000 0.029
HINDUNILVR Cons Staples 0.028 0.092
HDFC Financials 0.000 0.097
ICICIBANK Financials 0.058 -0.026
INFY Info Tech 0.000 0.014
ITC Cons Staples 0.003 0.185
KOTAKBANK Financials 0.000 0.098
LT Industrials 0.015 -0.026
LUPIN Health Care 0.000 0.029
MAHM Cons Disc 0.049 0.055
MARUTI Cons Disc 0.000 -0.034
NTPC Utilities 0.077 0.018
ONGC Energy 0.008 0.012
POWERGRID Utilities 0.150 0.122
RELIANCE Energy 0.059 0.066
SBIN Financials 0.089 -0.041
SUNPHARMA Health Care 0.044 0.027
TCS Info Tech 0.000 0.085
TATAMOTORS Cons Disc 0.034 -0.043
TATASTEEL Materials 0.011 -0.045
WIPRO Info Tech 0.088 0.024
ovariance matrix of 30 stocks.
r and constraints in terms of weights (total, sector-wise,

with factor tilt of -0.2 on market factor (Rm-Rf) and +0.2 on

traints include max weight for a sector of 0.25 and max

CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC

0.017 0.021 -0.006 0.036 0.081 0.009 -0.006
-0.014 -0.095 -0.046 -0.074 -0.185 0.018 -0.035
0.015 0.073 -0.023 0.116 0.159 0.058 0.009
0.063 0.027 -0.028 0.036 -0.071 0.030 0.048
0.117 -0.025 0.037 0.006 -0.095 0.103 0.055
0.000 0.014 -0.029 0.050 0.045 0.044 0.048
-0.051 -0.043 0.060 0.003 -0.007 -0.001 -0.024
0.133 0.051 0.031 0.103 -0.033 -0.015 0.101
-0.006 -0.036 -0.003 -0.042 0.032 -0.032 -0.022
-0.024 -0.011 0.042 -0.059 -0.047 -0.106 -0.057
-0.120 -0.128 -0.088 -0.034 -0.092 -0.068 -0.040
0.047 0.022 -0.003 -0.008 -0.081 0.044 0.080
0.063 0.025 0.140 0.087 0.061 0.246 0.020
-0.094 0.013 0.027 0.020 0.045 0.009 0.044
0.051 -0.073 0.053 -0.043 -0.045 -0.018 -0.011
0.017 -0.078 0.030 -0.095 0.087 0.052 -0.091
0.037 -0.119 -0.004 -0.035 0.107 0.016 -0.111
0.028 0.188 0.031 -0.008 0.013 -0.010 0.055
-0.049 -0.033 0.023 0.137 0.027 -0.027 0.109
-0.062 -0.062 0.005 -0.034 -0.020 -0.031 -0.040
0.017 0.061 0.012 0.000 0.005 -0.047 -0.041
0.017 -0.064 0.021 -0.063 -0.058 -0.009 0.007
-0.071 -0.021 0.106 0.055 -0.009 -0.044 0.006
-0.009 0.173 -0.125 0.114 0.149 0.093 0.073
0.031 0.007 0.050 -0.047 -0.041 -0.067 0.009
-0.042 0.265 -0.102 0.099 0.061 0.053 -0.030
0.133 0.031 0.061 0.036 0.114 0.036 0.123
0.035 -0.050 0.073 0.008 0.006 0.099 0.085
0.126 -0.040 0.045 0.005 0.010 0.075 0.000
0.209 -0.050 0.086 0.027 0.082 -0.001 -0.027
0.060 0.076 -0.026 0.041 0.071 -0.008 0.045
-0.054 -0.045 0.134 0.044 0.021 0.060 0.043
-0.021 0.075 -0.106 -0.013 -0.019 -0.041 -0.029
0.106 -0.066 -0.009 0.124 -0.082 0.221 0.108
-0.027 0.085 0.028 -0.014 -0.072 -0.031 0.049
0.037 -0.036 0.034 -0.049 -0.022 -0.047 -0.024
-0.110 -0.004 -0.057 -0.039 -0.124 -0.033 -0.114
0.015 0.072 0.062 0.056 0.151 0.006 0.050
-0.059 0.069 -0.002 0.009 -0.060 0.071 0.043
0.144 0.037 0.145 0.042 0.053 -0.002 0.036
-0.042 -0.172 0.054 -0.081 -0.110 -0.071 -0.118
-0.070 -0.115 -0.042 0.034 -0.006 -0.062 0.015
0.076 -0.026 0.022 0.021 0.074 -0.011 0.031
-0.072 0.029 -0.277 -0.024 0.040 0.004 -0.037
0.002 -0.012 -0.008 0.000 -0.009 0.059 0.031
-0.103 -0.031 -0.005 -0.036 -0.054 -0.058 -0.072
-0.125 -0.032 -0.028 -0.077 -0.029 0.012 -0.103
-0.010 0.021 -0.004 0.096 0.189 0.043 0.039
0.044 -0.022 0.013 0.052 -0.019 -0.008 -0.020
-0.126 0.010 0.025 0.038 0.062 -0.025 0.132
0.056 0.068 0.057 -0.002 0.021 0.063 0.005
0.048 0.042 -0.127 0.054 0.003 0.020 0.104
0.079 0.012 0.047 0.031 0.101 -0.011 0.018
0.012 -0.038 0.001 -0.019 -0.034 -0.058 -0.014
-0.015 0.001 0.078 -0.016 -0.024 -0.039 -0.008
-0.019 -0.055 -0.055 -0.052 -0.059 0.011 -0.094
-0.002 -0.032 -0.048 0.000 -0.044 -0.027 -0.007
0.006 0.028 -0.019 0.062 0.039 0.030 0.077
0.011 0.034 -0.060 0.076 -0.018 0.007 -0.003
0.011 -0.034 -0.081 0.033 0.040 0.047 0.095
CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC
0.018 0.019 0.018 0.014 0.019 0.016 0.016
0.015 0.016 0.015 0.012 0.016 0.013 0.013
0.020 0.020 0.019 0.015 0.021 0.017 0.017
0.014 0.014 0.014 0.011 0.014 0.012 0.012
0.017 0.017 0.017 0.013 0.018 0.015 0.014
0.060 0.015 0.014 0.011 0.015 0.012 0.012
0.015 0.065 0.014 0.011 0.015 0.013 0.013
0.014 0.014 0.059 0.011 0.015 0.012 0.012
0.011 0.011 0.011 0.037 0.011 0.010 0.009
0.015 0.015 0.015 0.011 0.066 0.013 0.013
0.012 0.013 0.012 0.010 0.013 0.046 0.011
0.012 0.013 0.012 0.009 0.013 0.011 0.045
0.018 0.018 0.018 0.014 0.019 0.015 0.015
0.016 0.016 0.015 0.012 0.016 0.014 0.013
0.010 0.011 0.010 0.008 0.011 0.009 0.009
0.012 0.013 0.012 0.009 0.013 0.011 0.010
0.018 0.018 0.017 0.014 0.018 0.015 0.015
0.015 0.015 0.015 0.011 0.015 0.013 0.013
0.013 0.014 0.013 0.011 0.014 0.012 0.012
0.019 0.020 0.019 0.015 0.020 0.017 0.016
0.015 0.016 0.015 0.012 0.016 0.013 0.013
0.016 0.016 0.016 0.012 0.017 0.014 0.014
0.011 0.012 0.011 0.009 0.012 0.010 0.010
0.013 0.014 0.013 0.010 0.014 0.011 0.011
0.021 0.021 0.020 0.016 0.022 0.018 0.018
0.015 0.015 0.015 0.012 0.015 0.013 0.013
0.012 0.013 0.012 0.010 0.013 0.011 0.011
0.021 0.022 0.021 0.017 0.022 0.019 0.018
0.022 0.023 0.022 0.017 0.023 0.020 0.019
0.015 0.016 0.015 0.012 0.016 0.013 0.013
 Sector Weights
Cons Disc Cons Staples Health Care Financials Info Tech Telecom Utilities
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 -0.037 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 -0.019 0.000
0.000 0.000 0.044 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.046 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.151 0.000 0.000 0.000
0.029 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.092 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.097 0.000 0.000 0.000
0.000 0.000 0.000 -0.026 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.014 0.000 0.000
0.000 0.185 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.098 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.029 0.000 0.000 0.000 0.000
0.055 0.000 0.000 0.000 0.000 0.000 0.000
-0.034 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.018
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.122
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 -0.041 0.000 0.000 0.000
0.000 0.000 0.027 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.085 0.000 0.000
-0.043 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.024 0.000 0.000
0.008 0.277 0.147 0.242 0.123 -0.019 0.140

CIPLA COALINDIA DRREDDY HDFCBANK HEROMOTOCO HINDUNILVR HDFC

0.012 0.012 0.012 0.012 0.012 0.012 0.012
0.044 0.031 0.046 0.151 0.029 0.092 0.097
e benchmark is market index, it has a beta of 1 on market factor, but 0 on other factors.

ariance portfolio 1. Set up portfolio optimisation objectives in terms of portfolio variance and tracking error and
Link for solver stock-wise) and factor tilt.
0.013 2. Form a buy-only portfolio which minimises the tracking error vis-à-vis the index with factor ti
value/growth (HML) factor, but is neutral on size and momentum factors. Additional constraints
1.000 weight for a stock of 0.15.
1.300 3. Construct a 130/30 extension strategy with objective to minimise the portfolio variance.

*Solver is not very robust when working with negative weights, esp with multiple constraints
ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM
-0.013 -0.147 0.076 0.068 -0.068 0.035 0.012
-0.024 0.002 -0.069 -0.043 -0.051 -0.030 -0.089
0.140 0.019 0.139 0.047 0.185 -0.007 0.078
0.061 -0.117 -0.012 -0.102 -0.027 0.115 0.001
-0.060 0.059 0.032 0.076 -0.011 -0.020 0.086
0.156 0.061 0.010 0.111 0.184 -0.001 0.124
-0.013 -0.062 0.034 -0.074 0.011 -0.056 0.016
0.040 0.025 0.048 0.101 0.020 0.036 0.062
0.029 -0.055 -0.045 -0.035 -0.043 0.032 -0.022
0.040 0.196 0.065 0.037 -0.046 -0.022 -0.050
-0.133 0.036 -0.046 -0.036 -0.121 -0.038 -0.028
-0.001 -0.011 0.042 -0.016 -0.007 0.069 -0.017
0.107 -0.233 0.058 0.077 0.102 0.109 0.066
0.070 0.096 0.043 0.103 -0.080 0.048 0.039
-0.079 0.030 -0.051 -0.084 -0.004 0.048 -0.004
-0.157 0.183 0.046 -0.104 -0.103 0.116 -0.050
-0.124 0.036 -0.107 0.004 -0.142 -0.090 -0.152
0.092 -0.036 0.097 0.020 0.084 0.060 0.052
0.259 0.103 -0.025 0.101 0.226 0.031 0.066
-0.054 0.007 -0.049 0.001 0.066 -0.042 0.058
0.022 0.032 -0.003 -0.043 0.018 0.055 -0.009
-0.108 0.054 0.003 -0.107 -0.087 -0.037 -0.064
0.049 0.026 0.001 0.033 0.118 0.123 0.087
0.186 -0.149 0.070 0.131 0.141 -0.065 0.000
-0.007 -0.037 -0.041 0.026 0.012 0.052 0.087
0.132 -0.054 -0.005 0.073 0.188 -0.061 0.141
0.072 0.097 -0.038 0.013 0.092 0.113 -0.074
0.031 0.029 0.089 0.071 -0.123 0.123 0.054
0.050 0.062 -0.009 0.080 0.019 0.082 0.162
-0.085 0.035 0.037 -0.029 -0.053 0.077 -0.039
0.127 0.092 -0.048 0.098 0.130 -0.024 -0.049
0.074 0.070 0.016 0.069 -0.015 0.076 0.010
-0.001 -0.103 0.008 0.044 -0.095 -0.043 -0.074
0.016 0.080 -0.006 0.039 0.129 0.103 0.016
-0.050 0.065 -0.026 0.052 0.033 0.096 0.016
-0.094 -0.041 -0.106 -0.067 -0.034 0.142 -0.088
 0.045 -0.130 -0.016 0.010 -0.056 -0.123 -0.041
-0.048 0.035 0.008 0.044 0.008 0.027 0.094
-0.019 0.028 -0.013 -0.014 0.070 0.023 0.010
-0.025 0.087 0.029 -0.004 -0.003 -0.104 0.066
-0.087 0.010 -0.009 -0.070 -0.100 0.132 -0.108
-0.034 0.054 0.005 -0.009 -0.083 0.048 0.025
0.019 -0.018 0.012 0.056 -0.043 -0.058 -0.068
-0.016 -0.047 0.020 0.000 -0.032 -0.075 0.151
-0.052 0.009 -0.052 0.032 -0.078 0.020 -0.076
-0.125 0.050 -0.030 -0.055 -0.141 -0.074 -0.036
-0.179 -0.074 -0.078 -0.081 -0.025 0.020 -0.009
0.240 0.119 0.104 0.075 0.122 -0.160 -0.019
-0.005 -0.011 -0.015 0.046 0.026 0.082 0.096
0.031 0.026 0.107 0.038 0.170 -0.088 -0.011
-0.004 -0.058 0.041 0.016 0.009 0.038 0.073
0.089 -0.088 0.024 -0.006 0.036 0.130 0.030
-0.025 -0.040 0.024 0.053 -0.016 -0.154 -0.025
-0.026 -0.004 -0.076 -0.040 -0.059 -0.002 -0.027
0.094 -0.034 -0.001 0.044 0.028 -0.003 -0.072
-0.049 -0.027 -0.045 -0.079 -0.070 0.006 -0.100
-0.042 0.031 0.029 -0.054 -0.029 -0.017 -0.006
0.049 -0.086 0.066 0.069 0.066 -0.016 0.041
0.023 0.085 0.011 0.032 0.013 -0.002 0.050
-0.003 0.003 0.065 0.084 0.068 -0.025 -0.022
ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM
0.023 0.020 0.013 0.016 0.023 0.019 0.017
0.019 0.017 0.011 0.013 0.019 0.016 0.014
0.025 0.022 0.015 0.017 0.025 0.021 0.019
0.017 0.015 0.010 0.012 0.017 0.014 0.013
0.021 0.019 0.012 0.014 0.021 0.018 0.016
0.018 0.016 0.010 0.012 0.018 0.015 0.013
0.018 0.016 0.011 0.013 0.018 0.015 0.014
0.018 0.015 0.010 0.012 0.017 0.015 0.013
0.014 0.012 0.008 0.009 0.014 0.011 0.011
0.019 0.016 0.011 0.013 0.018 0.015 0.014
0.015 0.014 0.009 0.011 0.015 0.013 0.012
0.015 0.013 0.009 0.010 0.015 0.013 0.012
0.096 0.020 0.013 0.015 0.022 0.019 0.017
0.020 0.075 0.011 0.013 0.020 0.016 0.015
0.013 0.011 0.033 0.009 0.013 0.011 0.010
0.015 0.013 0.009 0.045 0.015 0.013 0.012
0.022 0.020 0.013 0.015 0.095 0.018 0.017
0.019 0.016 0.011 0.013 0.018 0.066 0.014
0.017 0.015 0.010 0.012 0.017 0.014 0.056
0.024 0.021 0.014 0.016 0.024 0.020 0.018
0.019 0.017 0.011 0.013 0.019 0.016 0.015
0.020 0.018 0.012 0.014 0.020 0.017 0.015
0.015 0.013 0.008 0.010 0.014 0.012 0.011
0.017 0.015 0.010 0.011 0.016 0.014 0.013
0.026 0.023 0.015 0.018 0.026 0.022 0.020
0.019 0.016 0.011 0.013 0.019 0.016 0.014
0.016 0.014 0.009 0.011 0.016 0.013 0.012
0.027 0.024 0.016 0.018 0.027 0.022 0.020
0.028 0.025 0.016 0.019 0.028 0.023 0.021
0.019 0.017 0.011 0.013 0.019 0.016 0.014
Real estate
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

ICICIBANK INFY ITC KOTAKBANK LT LUPIN MAHM

0.011 0.012 0.012 0.012 0.011 0.012 0.012
-0.026 0.014 0.185 0.098 -0.026 0.029 0.055
ance and tracking error and constraints in terms of weights (total, sector-wise,

-à-vis the index with factor tilt of -0.2 on market factor (Rm-Rf) and +0.2 on
actors. Additional constraints include max weight for a sector of 0.25 and max

e the portfolio variance.

p with multiple constraints

MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
0.009 -0.008 0.002 0.024 -0.011 0.014 0.051
-0.199 -0.103 -0.066 -0.051 -0.048 0.125 -0.065
0.051 0.081 0.115 0.060 0.038 0.044 0.113
-0.038 -0.024 -0.003 0.038 0.000 -0.078 0.019
0.005 0.063 -0.040 0.006 0.033 -0.087 0.032
0.179 -0.005 0.016 0.007 0.078 0.207 0.031
0.057 -0.022 -0.050 -0.059 -0.044 -0.064 -0.006
0.020 -0.025 -0.019 0.028 -0.020 0.022 0.017
0.004 -0.041 0.023 -0.036 0.051 0.092 0.030
0.056 -0.006 0.263 -0.045 0.049 0.015 -0.031
-0.149 -0.044 -0.084 -0.046 -0.087 -0.150 0.111
-0.063 -0.040 0.002 0.011 -0.056 -0.012 0.014
0.298 0.102 0.043 0.053 0.013 0.086 0.156
-0.044 -0.026 -0.007 0.005 0.027 0.074 0.092
-0.048 -0.075 0.004 -0.028 0.064 -0.052 -0.041
-0.144 -0.098 -0.126 -0.099 0.004 -0.132 0.111
-0.066 -0.007 -0.152 -0.043 -0.032 -0.123 -0.087
0.083 0.132 0.068 0.012 -0.043 0.058 0.137
0.196 -0.004 0.088 0.023 0.102 0.104 0.019
0.020 -0.016 0.011 -0.067 -0.072 0.008 -0.066
0.044 -0.079 -0.024 0.041 0.042 -0.038 -0.015
-0.080 -0.055 -0.053 -0.049 -0.079 -0.144 0.028
-0.037 -0.116 0.052 -0.016 -0.045 -0.003 0.086
0.235 0.058 0.100 0.118 0.156 0.357 -0.115
-0.033 -0.037 0.016 0.001 0.000 0.078 0.095
0.176 0.368 0.154 0.144 0.142 0.286 -0.045
0.067 -0.032 0.113 0.136 -0.054 0.050 0.123
0.028 -0.077 -0.074 -0.053 -0.016 -0.099 0.145
0.101 -0.045 0.094 -0.032 -0.013 0.002 0.074
0.093 0.000 -0.067 0.049 -0.061 -0.015 -0.002
0.084 0.076 -0.016 0.068 0.051 0.100 -0.020
-0.006 -0.055 -0.069 -0.027 -0.014 0.184 -0.013
-0.009 0.003 -0.095 -0.036 -0.108 -0.037 -0.023
0.088 -0.009 0.023 0.065 0.020 -0.013 0.102
-0.014 0.082 -0.082 0.054 -0.060 -0.033 -0.012
0.016 -0.061 -0.051 -0.077 -0.055 -0.121 0.115
 0.003 0.014 -0.013 -0.026 0.040 0.006 -0.087
0.008 -0.097 0.077 0.004 0.022 0.037 0.022
0.056 0.001 -0.068 -0.039 0.134 -0.062 -0.101
0.070 -0.028 -0.125 0.011 -0.006 0.022 -0.066
-0.038 -0.106 -0.128 -0.083 -0.151 -0.092 0.085
0.119 0.030 -0.047 0.017 -0.001 -0.046 -0.038
-0.057 0.067 0.074 -0.031 0.096 -0.006 0.022
0.024 -0.018 -0.043 0.051 0.016 0.051 -0.183
0.002 0.108 0.026 0.032 0.040 -0.110 0.116
-0.117 -0.030 -0.070 0.040 0.017 -0.203 0.060
-0.213 -0.152 -0.146 -0.118 -0.070 -0.124 -0.025
0.142 0.071 0.105 0.064 0.088 0.222 -0.047
0.016 0.073 0.010 0.026 -0.065 -0.032 -0.015
0.091 0.026 -0.037 0.040 -0.030 0.078 -0.066
0.000 0.086 0.019 0.081 0.005 0.062 -0.005
0.131 0.008 0.012 0.074 0.042 0.042 0.082
0.064 -0.001 0.094 0.040 0.036 0.097 -0.072
0.079 -0.062 0.078 -0.039 0.018 -0.012 -0.045
0.068 0.021 0.117 -0.007 -0.031 0.024 -0.003
-0.109 0.067 0.024 0.086 -0.063 -0.003 -0.050
0.005 0.004 -0.012 -0.050 0.083 -0.039 -0.119
0.103 0.044 0.051 0.121 -0.039 0.036 -0.002
0.000 -0.046 -0.037 -0.070 0.182 0.031 0.070
0.011 0.012 -0.048 0.022 0.060 0.082 0.008
MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
0.025 0.020 0.020 0.015 0.017 0.027 0.019
0.020 0.016 0.017 0.012 0.014 0.022 0.016
0.027 0.022 0.022 0.016 0.018 0.029 0.021
0.019 0.015 0.015 0.011 0.013 0.020 0.015
0.023 0.018 0.019 0.014 0.016 0.025 0.018
0.019 0.015 0.016 0.011 0.013 0.021 0.015
0.020 0.016 0.016 0.012 0.014 0.021 0.015
0.019 0.015 0.016 0.011 0.013 0.020 0.015
0.015 0.012 0.012 0.009 0.010 0.016 0.012
0.020 0.016 0.017 0.012 0.014 0.022 0.015
0.017 0.013 0.014 0.010 0.011 0.018 0.013
0.016 0.013 0.014 0.010 0.011 0.018 0.013
0.024 0.019 0.020 0.015 0.017 0.026 0.019
0.021 0.017 0.018 0.013 0.015 0.023 0.016
0.014 0.011 0.012 0.008 0.010 0.015 0.011
0.016 0.013 0.014 0.010 0.011 0.018 0.013
0.024 0.019 0.020 0.014 0.016 0.026 0.019
0.020 0.016 0.017 0.012 0.014 0.022 0.016
0.018 0.015 0.015 0.011 0.013 0.020 0.014
0.111 0.021 0.021 0.016 0.018 0.028 0.020
0.021 0.073 0.017 0.013 0.014 0.023 0.016
0.021 0.017 0.076 0.013 0.015 0.023 0.017
0.016 0.013 0.013 0.041 0.011 0.017 0.012
0.018 0.014 0.015 0.011 0.053 0.019 0.014
0.028 0.023 0.023 0.017 0.019 0.131 0.022
0.020 0.016 0.017 0.012 0.014 0.022 0.067
0.017 0.014 0.014 0.010 0.012 0.018 0.013
0.029 0.023 0.024 0.018 0.020 0.031 0.023
0.030 0.024 0.025 0.018 0.021 0.033 0.024
0.020 0.016 0.017 0.012 0.014 0.022 0.016
MARUTI NTPC ONGC POWERGRID RELIANCE SBIN SUNPHARMA
0.011 0.012 0.012 0.012 0.012 0.011 0.012
-0.034 0.018 0.012 0.122 0.066 -0.041 0.027
 TCS TATAMOTORS TATASTEEL WIPRO Rm-Rf
0.059 0.142 -0.021 -0.084 -0.012
-0.006 -0.271 -0.138 0.004 -0.071
0.025 0.031 0.089 -0.022 0.068
-0.033 -0.057 -0.042 -0.156 -0.018
0.079 0.028 -0.130 0.075 0.005
-0.046 0.138 0.099 0.031 0.070
0.011 -0.054 -0.028 -0.087 -0.020
-0.007 0.071 -0.024 0.114 0.039
-0.048 0.133 0.105 -0.003 -0.002
0.062 -0.053 -0.062 0.041 0.017
0.122 -0.042 -0.160 0.007 -0.058
0.032 -0.069 -0.094 0.044 -0.007
-0.130 0.106 -0.036 -0.210 0.029
0.083 0.040 -0.043 -0.068 0.007
0.016 -0.108 -0.067 0.081 -0.024
0.191 0.032 -0.195 0.243 -0.010
0.106 0.019 0.263 0.098 -0.046
-0.056 0.104 -0.018 -0.029 0.033
0.089 0.137 0.224 -0.001 0.085
-0.056 0.042 0.192 -0.019 -0.024
0.076 -0.063 0.049 0.180 0.011
0.024 -0.078 -0.167 0.026 -0.039
0.010 0.185 -0.041 0.031 0.023
-0.071 -0.052 0.137 -0.098 0.053
0.023 0.034 0.011 -0.044 -0.005
-0.028 -0.005 0.179 -0.040 0.073
0.132 0.031 0.105 0.072 0.042
0.060 0.034 0.061 0.000 0.012
-0.027 0.167 -0.078 0.034 0.022
0.077 -0.049 -0.113 0.047 -0.008
-0.053 0.060 0.060 -0.061 0.041
0.009 -0.011 -0.039 0.033 0.024
-0.040 -0.076 -0.163 -0.061 -0.049
-0.034 0.172 -0.029 0.097 0.054
0.072 0.008 -0.096 0.081 0.000
-0.055 -0.080 -0.116 -0.054 -0.055
-0.037 -0.081 0.132 -0.148 -0.040
0.052 -0.059 -0.095 0.037 0.024
-0.020 -0.104 -0.079 -0.038 -0.008
-0.021 -0.122 -0.171 0.052 0.005
0.016 -0.121 -0.096 -0.002 -0.071
0.003 -0.128 -0.064 0.039 -0.011
-0.038 0.283 0.159 -0.045 0.014
-0.058 0.096 -0.073 -0.006 -0.024
0.025 -0.082 0.122 -0.029 -0.007
-0.022 -0.144 -0.042 0.007 -0.053
-0.092 -0.113 -0.008 -0.078 -0.079
0.148 0.282 0.278 0.079 0.097
0.001 0.054 0.092 -0.022 0.006
0.012 0.115 -0.052 -0.019 0.036
-0.005 -0.004 -0.043 0.016 0.007
0.024 0.091 0.122 -0.025 0.034
-0.046 0.063 0.039 -0.106 0.009
-0.039 -0.010 0.006 -0.031 -0.026
-0.014 -0.003 0.076 -0.038 -0.002
-0.056 -0.148 0.021 0.002 -0.051
0.032 0.021 -0.063 0.014 -0.006
-0.058 0.106 0.177 -0.041 0.034
0.102 -0.133 0.039 0.074 0.035
-0.019 0.016 -0.005 0.050 0.025
TCS TATAMOTORS TATASTEEL WIPRO
0.016 0.028 0.029 0.019
0.013 0.023 0.024 0.016
0.018 0.030 0.031 0.021
0.012 0.021 0.022 0.015
0.015 0.025 0.027 0.018
0.012 0.021 0.022 0.015
0.013 0.022 0.023 0.016
0.012 0.021 0.022 0.015
0.010 0.017 0.017 0.012
0.013 0.022 0.023 0.016
0.011 0.019 0.020 0.013
0.011 0.018 0.019 0.013
0.016 0.027 0.028 0.019
0.014 0.024 0.025 0.017
0.009 0.016 0.016 0.011
0.011 0.018 0.019 0.013
0.016 0.027 0.028 0.019
0.013 0.022 0.023 0.016
0.012 0.020 0.021 0.014
0.017 0.029 0.030 0.020
0.014 0.023 0.024 0.016
0.014 0.024 0.025 0.017
0.010 0.018 0.018 0.012
0.012 0.020 0.021 0.014
0.018 0.031 0.033 0.022
0.013 0.023 0.024 0.016
0.048 0.019 0.020 0.013
0.019 0.140 0.034 0.023
0.020 0.034 0.153 0.024
0.013 0.023 0.024 0.069
 TCS TATAMOTORS TATASTEEL WIPRO
0.012 0.011 0.011 0.012
0.085 -0.043 -0.045 0.024
Err:504
You are provided with historical excess returns (Ri-Rf), the four factor beta and variance-covariance matrix of six stocks.
Form a long-only portfolio which minimises the tracking error vis-à-vis the market index with factor tilt of -0.15 on marke
value/growth (HML) factor, but is neutral on size and momentum factors. The max weight for a single stock should be 0.5

Excess Stock Returns (Ri-Rf)

Month A B C D E F Rm-Rf
1 -0.006 0.032 -0.005 0.026 0.073 0.092 0.006
2 0.128 -0.039 0.031 0.170 0.026 -0.052 0.036
3 0.020 0.035 -0.004 0.009 0.086 -0.043 0.007
4 0.106 -0.016 0.089 0.036 0.008 0.122 0.034
5 0.034 -0.085 -0.025 -0.016 -0.001 0.039 0.009
6 -0.003 -0.059 -0.026 -0.059 -0.062 0.006 -0.026
7 -0.084 0.010 0.094 0.028 0.021 0.076 -0.002
8 -0.096 0.013 -0.049 -0.070 0.067 0.021 -0.051
9 -0.086 -0.064 -0.042 -0.029 0.004 -0.063 -0.006
10 0.084 0.134 0.049 0.066 0.044 0.177 0.034
11 0.051 0.045 0.023 0.013 -0.046 0.039 0.035
12 0.041 -0.047 -0.003 0.068 0.012 -0.005 0.025
Factor Betas
Beta: MKT 1.231 0.590 1.702 1.712 0.447 0.647
Beta: SMB -0.084 -0.576 -0.113 0.040 0.102 0.035
Beta: HML -0.053 0.359 0.072 0.046 0.428 0.244
Beta: WML 0.529 -0.129 -0.186 -0.112 -0.405 -1.057

Covariance Matrix
A B C D E F
A 0.0687 0.0178 0.0189 0.0188 0.0164 0.0238
B 0.0178 0.0859 0.0211 0.0210 0.0183 0.0266
C 0.0189 0.0211 0.0963 0.0223 0.0194 0.0282
D 0.0188 0.0210 0.0223 0.0955 0.0193 0.0281
E 0.0164 0.0183 0.0194 0.0193 0.0727 0.0245
F 0.0238 0.0266 0.0282 0.0281 0.0245 0.1530

Solution
Setting optimisation objectives and constraints
Transposed 0.42990661 0.015819 0.047981 0 0.489219 0.017073
Weights
A 0.42990661
B 0.01581922
C 0.04798143
D 0
E 0.48921932
F 0.01707342

Tracking Error
Month Rp-Rf Rm-Rf Rp-Rm
1 0.035 0.006 0.029
2 0.068 0.036 0.032
3 0.050 0.007 0.043
4 0.055 0.034 0.022
5 0.013 0.009 0.004
6 -0.034 -0.026 -0.008
7 -0.020 -0.002 -0.018
8 -0.011 -0.051 0.040
9 -0.039 -0.006 -0.033
10 0.065 0.034 0.031
11 0.002 0.035 -0.033
12 0.023 0.025 -0.003

Obj/Const Solver link Target Values

Tracking erro 0.0277 Min
Sum Wt 1 1
Min Wt 0
Max Wt 0.49 0.5
Tilt: MKT -0.15 -0.15
Tilt: SMB 0.00 0
Tilt: HML 0.20 0.2
Tilt: WML 0.00 0

Optimal portfolio
Stock Weights
A 0.43
B 0.02
C 0.05
D 0.00
E 0.49
F 0.02
riance matrix of six stocks.
factor tilt of -0.15 on market factor (Rm-Rf) and +0.2 on
a single stock should be 0.50.

<------ Create the link using matrix operation TRANSPOSE

We do not need the covariance matrix since the

objective is to minimise tracking error not variance
or Sharpe ratio.
<---Naming a cell range is useful for repeated tasks

<---You can select multiple adjacent constraints

<---Since this is a long-only portfolio