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For each question you have to provide: An executive report with your results: this report should provide in a concise manner all the results required for a given question. If you have never written an...

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For each question you have to provide:

  • An executive report with your results: this report should provide in a concise manner all the results required for a given question. If you have never written an executive report, you can take a look at this website. The maximum length of the report is one page without counting figures or tables.

  • A Python notebook with calculations supporting your results: include markup cells with com- ments to guide the reader across the document.


Question:Question 2

[10pts] The following exercises are based on the hedge fund index data provided. The underlying data is the same as that used in the exercises for Question 1 and these exercises complement each other.

Suppose that you were running a multi-strategy hedge fund in 2003 and you are allocating capital across various trading groups. Compute the excess return of each of the hedge fund indices and build your report based on the following analyses:

  1. Define portfolio with equal weights (i.e. 1/9) using the first 9 hedge fund styles (not including the overall index called “DJCS Hedge Fund USD”). Compute the excess return of the corresponding portfolio (as the dot product of portfolio weights and excess returns of hedge funds). Finally, compute the Sharpe ratio over the early sample XXXXXXXXXXthat you would have been aware of in 2003), the late sample XXXXXXXXXXthe period over which your returns would be realized), and the full sample.

  2. Compute another weighted average of these 9 hedge fund styles, where the weights are chosen to maximize the Sharpe ratio over the early sample (e.g., update the code we developed in class so that the objective function is the Sharpe ratio; do not use any constraint). What is the SR of this portfolio over the late sample? How does the answer compare to the equal-weighted portfolio of the previous point? Discuss the issues with portfolio optimization and what you might do about it.

hfdata-1ethw4wa.xlsx hfdata-wor5g5o5-2e3z5cuo.xlsx assignment1-bpv14xr1-ltz5w2kq.pdf
Answered Same Day Mar 11, 2021

Solution

Abr Writing answered on Mar 13 2021
157 Votes
Assignment 1 (1).ipyn
{
"cells": [
{
"cell_type": "markdown",
"metadata": {},
"source": [
"Importing the necessary li
aries"
]
},
{
"cell_type": "code",
"execution_count": 1,
"metadata": {},
"outputs": [],
"source": [
"from pandas import read_excel, DataFrame\n",
"from matplotlib import pyplot as plt\n",
"from numpy import dot, zeros, a
ay, random, sqrt, mean, std"
]
},
{
"cell_type": "markdown",
"metadata": {},
"source": [
"Reading the data file and showing the first five data instances"
]
},
{
"cell_type": "code",
"execution_count": 2,
"metadata": {},
"outputs": [
{
"data": {
"text/html": [
"
\n",
"