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Targbeta

This document demonstrates how to use a spreadsheet model and the Solver tool to determine a set of stock weights that will achieve a target portfolio beta of 1.15. The model requires inputting the company name, stock beta, and running the Solver. It then outputs the amount to invest in each stock and the resulting portfolio weight and beta. Short sales are not allowed in this example model.

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Muhammad Ahsan Mukhtar
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38 views

Targbeta

This document demonstrates how to use a spreadsheet model and the Solver tool to determine a set of stock weights that will achieve a target portfolio beta of 1.15. The model requires inputting the company name, stock beta, and running the Solver. It then outputs the amount to invest in each stock and the resulting portfolio weight and beta. Short sales are not allowed in this example model.

Uploaded by

Muhammad Ahsan Mukhtar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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targbeta.

xls

This sample worksheet demonstrates one method of finding a set of weights that will ensure that your portfolio beta is equal to the
target beta. It uses the Solver (choose Tools Solver… from the menus to see how the model is set up). The first column is simply the
name of the company. The Amount is the amount that should be invested in a particular stock to achieve the target beta (this amount
will be automatically set by the Solver). The Commission is the amount that Stock-Trak will charge you for the trade ($25 on stocks,
etc). You will have to enter the appropriate commission. The Weight is simply the proportion of the total value that is invested in a
particular stock. The Beta is the actual beta of a particular stock (you must enter the beta). This example does not allow short sales,
though you can alter it to do so. If your beginning portfolio will have more than 5 securities, insert extra rows in the middle of the
range so that the formulas will automatically include them.

Notes: You only need to enter the company name and beta. The model is set up for a target beta of 1.15. You must run the Solver to
get the correct weights. Please make sure that you understand the model before trying to use it. The solution that you get is not
necessarily the only solution.

Stock Amount Commission Weight Beta


A 55,894.88 25.00 55.96% 1.20
B 24,222.97 25.00 24.25% 1.40
C 955.15 25.00 0.96% 0.30 Input actual betas
D 7,289.54 25.00 7.30% 0.60
E 11,512.47 25.00 11.53% 0.80
Total 99,875.00 125.00 100.00% 1.15 This is the calculated portfolio beta

Total Invested 100,000.00

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targbeta.xls

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Page 2

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