Portfolio Critique Using Morningstar.com




Part One



Portfolio Critique Using Morningstar.com


Morningstar, Inc. is a leading provider of independent investment research in the United States and in major international markets and offers an extensive line of Internet, software, and print-based products for individual investors, financial advisors, and institutional clients. Morningstar is a trusted source for insightful information on stocks, mutual funds, variable annuities, closed-end funds, exchange-traded funds, separate accounts, hedge funds, and 529 college savings plans.



  1. Go to www.morningstar.com. Sign up for Premium Membership. You will be able to receive a 14-day free trial. Browse the site to become familiar with everything Morningstar has to offer. Be prepared to participate in classroom discussion and bring your questions if you have any.



  1. Go to X-Ray and print the page. Write a portfolio critique.


Part Two



Use the daily data on the portfolio returns and the market returns (e.g., the S&P 500 index) to estimate a single-index market model. Your analysis should include

(Morningstar automatically will calculate)

  1. Standard deviation for each portfolio.
  2. Covariance between the rates of return of portfolio and S&P500.
  3. The correlation coefficient between each portfolio and S&P500.
  4. Run a regression of each portfolio against the market return and find:\

(In fact Morningstar will automatically calculate)

  • Alpha for each portfolio.
  • Beta for each portfolio.
  • What is the systematic and nonsystematic risk of the each security?
  • Sharpe Ratio of portfolios
  1. Plot the risk and return of each portfolio and draw the efficient frontiers.
  2. Identify which portfolio dominates on the efficient frontier.
  3. For which portfolio had an average return in excess of that predicated by the CAPM?