A B C D E F G H

1 HIGH-BETA INDEX FROM DOW-JONES 30 COMP

American
3M American
Alcoa International Caterpillar DuPont Exxon
2 Company Express
AA Group CAT DD XOM
MMM AXP
AIG
3 Market cap ($B) 65.66 39.11 77.91 180.72 55.7 49.08 519.89
4 Beta 1.07 1.37 1.06 1.17 1.98 1.06 1.13
5
6 Stock prices
7 2-Jul-02 56.69 24.41 29.46 61.98 20.21 35.54 32.85
8 1-Aug-02 56.56 22.64 30.12 60.89 19.73 34.46 31.88
9 3-Sep-02 49.78 17.41 26.05 53.08 16.83 30.84 28.69
10 1-Oct-02 57.47 19.91 30.46 60.70 18.64 35.27 30.27
11 1-Nov-02 59.07 23.20 32.60 63.22 22.76 38.47 31.50
12 2-Dec-02 56.09 20.69 29.67 56.18 20.86 36.55 31.63
13 2-Jan-03 56.66 17.95 29.82 52.56 20.21 32.65 30.92
14 3-Feb-03 57.33 18.76 28.18 47.87 21.60 31.92 31.01
15 3-Mar-03 59.46 17.74 27.89 48.07 22.61 33.83 31.85
16 1-Apr-03 57.64 21.13 31.85 56.33 24.34 37.02 32.08
17 1-May-03 58.14 22.67 35.05 56.26 24.13 36.98 33.41
18 2-Jun-03 59.29 23.49 35.18 53.68 25.75 36.54 32.96
19 1-Jul-03 64.45 25.59 37.25 62.46 31.40 38.56 32.66
20 1-Aug-03 65.80 26.46 37.99 57.95 33.43 39.58 34.84
21 2-Sep-03 63.80 24.24 38.00 56.20 32.04 35.39 33.83
22 1-Oct-03 72.85 29.25 39.67 59.24 34.27 35.74 33.81
23 3-Nov-03 73.32 30.54 38.64 56.44 35.56 36.99 33.69
24 1-Dec-03 78.88 35.37 40.85 64.62 38.82 40.95 38.16
25 2-Jan-04 73.37 31.82 43.91 67.72 36.70 39.17 37.96
26 2-Feb-04 72.70 35.03 45.25 72.15 35.58 40.55 39.49
27 1-Mar-04 76.29 32.44 44.00 69.63 37.14 37.97 38.95
28 1-Apr-04 80.58 28.75 41.54 69.92 36.68 38.63 39.85
29 3-May-04 79.14 29.41 43.02 71.53 35.56 39.18 40.77
30 1-Jun-04 84.24 31.03 43.69 69.63 37.49 40.29 41.86
31 1-Jul-04 77.08 30.09 42.73 69.02 34.86 38.88 43.64
32 2-Aug-04 77.43 30.57 42.53 69.59 34.48 38.65 43.71
33 1-Sep-04 75.18 31.71 43.75 66.49 38.16 39.14 45.83
34 1-Oct-04 72.93 30.68 45.23 59.37 38.40 39.21 46.67
35 1-Nov-04 75.16 32.23 47.48 61.95 43.65 41.78 48.86
36 1-Dec-04 77.50 29.79 48.04 64.30 46.49 45.21 48.87
37 3-Jan-05 79.66 27.99 45.56 64.90 42.66 43.84 49.19
38 1-Feb-05 79.66 30.62 46.25 65.40 45.51 49.47 60.65
39 1-Mar-05 81.32 28.97 43.98 54.35 43.78 47.56 57.10
40 1-Apr-05 72.57 27.67 45.12 49.88 42.36 43.73 54.64
41 2-May-05 73.14 25.97 46.10 54.49 45.27 43.51 54.11
42 1-Jun-05 68.99 25.04 45.67 57.12 45.85 40.24 55.34
43 1-Jul-05 71.57 26.88 47.19 59.18 52.11 39.93 56.57
44 1-Aug-05 68.30 25.81 47.40 58.35 53.64 37.34 57.96
45 1-Sep-05 70.42 23.52 49.28 61.07 56.79 36.97 61.48
46 3-Oct-05 72.93 23.40 48.90 63.87 51.07 39.34 54.32
 A B C D E F G H
47 1-Nov-05 75.73 26.56 50.52 66.18 56.11 40.70 56.44
48 1-Dec-05 74.79 28.66 50.56 67.25 56.10 40.46 54.63
49 3-Jan-06 70.20 30.53 51.65 64.52 66.20 37.27 61.03
50 1-Feb-06 71.46 28.55 53.06 65.41 71.25 38.66 58.05
51 1-Mar-06 73.50 29.76 51.75 65.29 70.01 40.56 59.50
52 3-Apr-06 82.96 32.89 53.11 64.46 74.08 42.37 61.67
53 1-May-06 81.67 31.02 53.65 60.21 71.35 41.20 59.85
54 1-Jun-06 78.85 31.65 52.53 58.48 72.84 40.30 60.28
55 3-Jul-06 68.73 29.29 51.53 60.08 69.61 38.42 66.56
56 1-Aug-06 70.45 28.11 52.00 63.37 65.17 39.08 66.80
57 1-Sep-06 73.13 27.57 55.51 65.79 64.63 41.89 66.24
58 2-Oct-06 77.47 28.42 57.37 66.69 59.89 44.78 70.51
59 1-Nov-06 80.50 30.80 58.28 69.99 61.20 46.25 76.16
60 1-Dec-06 77.01 29.71 60.21 71.32 60.51 48.00 75.98
61 3-Jan-07 73.42 32.14 57.92 68.12 63.53 48.84 73.47
62 1-Feb-07 73.67 33.25 56.58 66.96 63.88 50.36 71.37
63 1-Mar-07 76.00 33.73 56.11 67.07 66.46 49.07 75.13
64 2-Apr-07 82.31 35.32 60.52 69.75 72.32 48.81 79.04
65 1-May-07 87.96 41.28 64.82 72.34 78.25 52.32 83.17
66 1-Jun-07 86.79 40.53 61.03 70.03 77.97 50.84 83.88
67 2-Jul-07 90.21 43.08 64.51 69.04 83.20 52.62 91.94
 I J K L M N O
OM DOW-JONES
1 30 COMPONENTS
Hewlett Home
Honeywell Intel McDonalds Merck
2 Packard Depot IBM
HON INTC MCD MRK
HPQ HD

3 126.75 78.37 47.55 146.76 172.03 62.88 106.93

4 1.6 1.2 1.3 1.9 1.81 1.37 1.16
5
6
7 13.22 29.07 28.77 17.76 67.04 22.57 38.95
8 12.54 31.00 26.78 15.78 71.94 21.67 39.67
9 10.96 24.61 19.37 13.14 55.65 16.11 36.16
10 14.84 27.23 21.41 16.37 75.34 16.52 42.91
11 18.30 24.89 23.45 19.78 83.11 17.11 47.00
12 16.38 22.70 21.64 14.75 74.10 14.87 45.06
13 16.43 19.75 22.03 14.84 74.77 13.17 44.09
14 14.96 22.16 20.80 16.36 74.67 12.59 41.99
15 14.75 23.08 19.41 15.44 75.13 13.37 43.91
16 15.46 26.66 21.45 17.45 81.33 15.81 46.64
17 18.49 30.79 23.99 19.77 84.50 17.32 44.56
18 20.28 31.44 24.59 19.76 79.18 20.40 48.85
19 20.15 29.62 25.90 23.63 77.98 21.28 44.60
20 18.97 30.53 26.72 27.17 78.87 20.73 42.89
21 18.50 30.30 24.29 26.15 84.94 21.77 43.47
22 21.32 35.27 28.22 31.31 86.05 23.12 38.00
23 20.78 34.97 27.54 31.89 87.23 24.07 34.86
24 22.03 33.83 31.01 30.48 89.29 23.32 40.02
25 22.82 33.81 33.51 29.02 95.60 24.17 41.23
26 21.79 34.61 32.68 27.80 93.12 26.58 41.65
27 21.99 35.68 31.56 25.90 88.62 26.83 38.58
28 18.97 33.61 32.25 24.50 85.08 25.57 41.03
29 20.45 34.30 31.61 27.22 85.66 24.79 41.29
30 20.39 33.70 34.35 26.32 85.23 24.42 41.79
31 19.47 32.28 35.27 23.25 84.19 25.83 39.89
32 17.29 35.08 33.93 20.33 82.06 25.37 39.56
33 18.20 37.61 33.81 19.16 83.08 26.32 29.28
34 18.11 39.42 31.76 21.26 86.97 27.38 27.78
35 19.41 40.14 33.49 21.41 91.49 29.40 24.86
36 20.43 41.09 33.57 22.38 95.71 30.67 28.91
37 19.09 39.67 34.11 21.48 90.70 30.98 25.23
38 20.26 38.48 36.18 23.04 90.05 31.64 28.51
39 21.46 36.86 35.46 22.31 88.89 29.79 29.46
40 20.02 34.09 34.08 22.58 74.29 28.04 30.85
41 22.02 37.93 34.72 25.97 73.68 29.60 29.53
42 23.08 37.59 35.11 25.07 72.37 26.54 28.37
43 24.17 42.04 37.65 26.15 81.40 29.82 28.60
44 27.25 39.06 36.89 24.85 78.82 31.04 26.35
45 28.74 36.94 36.14 23.82 78.43 32.03 25.40
46 27.60 39.75 32.96 22.71 80.05 30.23 26.34
 I J K L M N O
47 29.21 40.57 35.41 25.87 87.12 33.04 27.80
48 28.26 39.31 36.10 24.20 80.55 32.92 30.07
49 30.77 39.37 37.23 20.61 79.67 34.18 32.62
50 32.38 40.93 39.90 20.07 78.83 34.08 32.96
51 32.55 41.22 41.67 18.96 81.02 33.54 33.67
52 32.13 38.91 41.41 19.46 80.89 33.75 32.90
53 32.04 37.15 40.34 17.64 78.78 32.38 32.19
54 31.43 35.02 39.47 18.60 75.74 32.80 35.23
55 31.66 33.96 37.91 17.63 76.33 34.55 38.94
56 36.27 33.55 38.15 19.27 80.15 35.04 39.57
57 36.48 35.64 40.30 20.26 81.11 38.19 40.89
58 38.52 36.68 41.50 21.01 91.40 40.92 44.33
59 39.23 37.54 42.57 21.18 91.29 41.97 43.44
60 41.04 39.70 44.81 20.04 96.48 44.33 42.91
61 43.12 40.27 45.26 20.74 98.47 44.35 44.04
62 39.20 39.14 46.20 19.76 92.58 43.69 43.45
63 40.07 36.53 45.86 19.03 93.89 45.05 43.84
64 42.07 37.66 53.95 21.39 101.81 48.28 51.06
65 45.63 38.65 57.91 22.18 106.60 50.55 52.06
66 44.62 39.35 56.28 23.74 105.25 50.76 49.80
67 48.54 39.39 60.96 24.55 114.81 52.09 49.02
 A B C D E F G H I
1 HIGH-BETA INDEX FROM DOW-JONES 30 COMPON
2 MMM AA AXP AIG CAT DD XOM HPQ
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08 519.89 126.75
4 Beta 1.07 1.37 1.06 1.17 1.98 1.06 1.13 1.6
5
6 Returns
7 1-Aug-02 -0.23% -7.53% 2.22% -1.77% -2.40% -3.09% -3.00% -5.28%
8 3-Sep-02 -12.77% -26.27% -14.52% -13.73% -15.90% -11.10% -10.54% -13.47%
9 1-Oct-02 14.36% 13.42% 15.64% 13.41% 10.21% 13.42% 5.36% 30.31%
10 1-Nov-02 2.75% 15.29% 6.79% 4.07% 19.97% 8.68% 3.98% 20.96%
11 2-Dec-02 -5.18% -11.45% -9.42% -11.81% -8.72% -5.12% 0.41% -11.08%
12 2-Jan-03 1.01% -14.21% 0.50% -6.66% -3.17% -11.28% -2.27% 0.30%
13 3-Feb-03 1.18% 4.41% -5.66% -9.35% 6.65% -2.26% 0.29% -9.37%
14 3-Mar-03 3.65% -5.59% -1.03% 0.42% 4.57% 5.81% 2.67% -1.41%
15 1-Apr-03 -3.11% 17.49% 13.28% 15.86% 7.37% 9.01% 0.72% 4.70%
16 1-May-03 0.86% 7.03% 9.57% -0.12% -0.87% -0.11% 4.06% 17.90%
17 2-Jun-03 1.96% 3.55% 0.37% -4.69% 6.50% -1.20% -1.36% 9.24%
18 1-Jul-03 8.34% 8.56% 5.72% 15.15% 19.84% 5.38% -0.91% -0.64%
19 1-Aug-03 2.07% 3.34% 1.97% -7.49% 6.26% 2.61% 6.46% -6.03%
20 2-Sep-03 -3.09% -8.76% 0.03% -3.07% -4.25% -11.19% -2.94% -2.51%
21 1-Oct-03 13.26% 18.79% 4.30% 5.27% 6.73% 0.98% -0.06% 14.19%
22 3-Nov-03 0.64% 4.32% -2.63% -4.84% 3.70% 3.44% -0.36% -2.57%
23 1-Dec-03 7.31% 14.68% 5.56% 13.53% 8.77% 10.17% 12.46% 5.84%
24 2-Jan-04 -7.24% -10.58% 7.22% 4.69% -5.62% -4.44% -0.53% 3.52%
25 2-Feb-04 -0.92% 9.61% 3.01% 6.34% -3.10% 3.46% 3.95% -4.62%
26 1-Mar-04 4.82% -7.68% -2.80% -3.56% 4.29% -6.57% -1.38% 0.91%
27 1-Apr-04 5.47% -12.08% -5.75% 0.42% -1.25% 1.72% 2.28% -14.77%
28 3-May-04 -1.80% 2.27% 3.50% 2.28% -3.10% 1.41% 2.28% 7.51%
29 1-Jun-04 6.25% 5.36% 1.55% -2.69% 5.29% 2.79% 2.64% -0.29%
30 1-Jul-04 -8.88% -3.08% -2.22% -0.88% -7.27% -3.56% 4.16% -4.62%
31 2-Aug-04 0.45% 1.58% -0.47% 0.82% -1.10% -0.59% 0.16% -11.87%
32 1-Sep-04 -2.95% 3.66% 2.83% -4.56% 10.14% 1.26% 4.74% 5.13%
33 1-Oct-04 -3.04% -3.30% 3.33% -11.33% 0.63% 0.18% 1.82% -0.50%
34 1-Nov-04 3.01% 4.93% 4.85% 4.25% 12.81% 6.35% 4.59% 6.93%
35 1-Dec-04 3.07% -7.87% 1.17% 3.72% 6.30% 7.89% 0.02% 5.12%
36 3-Jan-05 2.75% -6.23% -5.30% 0.93% -8.60% -3.08% 0.65% -6.78%
37 1-Feb-05 0.00% 8.98% 1.50% 0.77% 6.47% 12.08% 20.94% 5.95%
38 1-Mar-05 2.06% -5.54% -5.03% -18.51% -3.88% -3.94% -6.03% 5.75%
39 1-Apr-05 -11.38% -4.59% 2.56% -8.58% -3.30% -8.40% -4.40% -6.95%
40 2-May-05 0.78% -6.34% 2.15% 8.84% 6.64% -0.50% -0.97% 9.52%
41 1-Jun-05 -5.84% -3.65% -0.94% 4.71% 1.27% -7.81% 2.25% 4.70%
42 1-Jul-05 3.67% 7.09% 3.27% 3.54% 12.80% -0.77% 2.20% 4.61%
43 1-Aug-05 -4.68% -4.06% 0.44% -1.41% 2.89% -6.71% 2.43% 11.99%
44 1-Sep-05 3.06% -9.29% 3.89% 4.56% 5.71% -1.00% 5.90% 5.32%
45 3-Oct-05 3.50% -0.51% -0.77% 4.48% -10.62% 6.21% -12.38% -4.05%
46 1-Nov-05 3.77% 12.67% 3.26% 3.55% 9.41% 3.40% 3.83% 5.67%
47 1-Dec-05 -1.25% 7.61% 0.08% 1.60% -0.02% -0.59% -3.26% -3.31%
48 3-Jan-06 -6.33% 6.32% 2.13% -4.14% 16.55% -8.21% 11.08% 8.51%
49 1-Feb-06 1.78% -6.71% 2.69% 1.37% 7.35% 3.66% -5.01% 5.10%
 A B C D E F G H I
50 1-Mar-06 2.81% 4.15% -2.50% -0.18% -1.76% 4.80% 2.47% 0.52%
51 3-Apr-06 12.11% 10.00% 2.59% -1.28% 5.65% 4.37% 3.58% -1.30%
52 1-May-06 -1.57% -5.85% 1.01% -6.82% -3.75% -2.80% -3.00% -0.28%
53 1-Jun-06 -3.51% 2.01% -2.11% -2.92% 2.07% -2.21% 0.72% -1.92%
54 3-Jul-06 -13.74% -7.75% -1.92% 2.70% -4.54% -4.78% 9.91% 0.73%
55 1-Aug-06 2.47% -4.11% 0.91% 5.33% -6.59% 1.70% 0.36% 13.59%
56 1-Sep-06 3.73% -1.94% 6.53% 3.75% -0.83% 6.94% -0.84% 0.58%
57 2-Oct-06 5.77% 3.04% 3.30% 1.36% -7.62% 6.67% 6.25% 5.44%
58 1-Nov-06 3.84% 8.04% 1.57% 4.83% 2.16% 3.23% 7.71% 1.83%
59 1-Dec-06 -4.43% -3.60% 3.26% 1.88% -1.13% 3.71% -0.24% 4.51%
60 3-Jan-07 -4.77% 7.86% -3.88% -4.59% 4.87% 1.73% -3.36% 4.94%
61 1-Feb-07 0.34% 3.40% -2.34% -1.72% 0.55% 3.06% -2.90% -9.53%
62 1-Mar-07 3.11% 1.43% -0.83% 0.16% 3.96% -2.59% 5.13% 2.20%
63 2-Apr-07 7.98% 4.61% 7.57% 3.92% 8.45% -0.53% 5.07% 4.87%
64 1-May-07 6.64% 15.59% 6.86% 3.65% 7.88% 6.94% 5.09% 8.12%
65 1-Jun-07 -1.34% -1.83% -6.02% -3.25% -0.36% -2.87% 0.85% -2.24%
66 2-Jul-07 3.86% 6.10% 5.55% -1.42% 6.49% 3.44% 9.17% 8.42%
67
68 Average 0.77% 0.95% 1.31% 0.18% 2.36% 0.65% 1.72% 2.17%
 J K L M N O
OW-JONES1 30 COMPONENTS
2 HD HON INTC IBM MCD MRK
3 78.37 47.55 146.76 172.03 62.88 106.93
4 1.2 1.3 1.9 1.81 1.37 1.16
5
6
7 6.43% -7.17% -11.82% 7.05% -4.07% 1.83%
8 -23.08% -32.39% -18.31% -25.68% -29.65% -9.26%
9 10.12% 10.01% 21.98% 30.29% 2.51% 17.12%
10 -8.99% 9.10% 18.92% 9.82% 3.51% 9.10%
11 -9.21% -8.03% -29.34% -11.47% -14.03% -4.22%
12 -13.92% 1.79% 0.61% 0.90% -12.14% -2.18%
13 11.51% -5.75% 9.75% -0.13% -4.50% -4.88%
14 4.07% -6.92% -5.79% 0.61% 6.01% 4.47%
15 14.42% 9.99% 12.24% 7.93% 16.76% 6.03%
16 14.40% 11.19% 12.48% 3.82% 9.12% -4.56%
17 2.09% 2.47% -0.05% -6.50% 16.37% 9.19%
18 -5.96% 5.19% 17.89% -1.53% 4.22% -9.10%
19 3.03% 3.12% 13.96% 1.13% -2.62% -3.91%
20 -0.76% -9.53% -3.83% 7.41% 4.90% 1.34%
21 15.19% 15.00% 18.01% 1.30% 6.02% -13.45%
22 -0.85% -2.44% 1.84% 1.36% 4.03% -8.62%
23 -3.31% 11.87% -4.52% 2.33% -3.17% 13.80%
24 -0.06% 7.75% -4.91% 6.83% 3.58% 2.98%
25 2.34% -2.51% -4.29% -2.63% 9.50% 1.01%
26 3.04% -3.49% -7.08% -4.95% 0.94% -7.66%
27 -5.98% 2.16% -5.56% -4.08% -4.81% 6.16%
28 2.03% -2.00% 10.53% 0.68% -3.10% 0.63%
29 -1.76% 8.31% -3.36% -0.50% -1.50% 1.20%
30 -4.30% 2.64% -12.40% -1.23% 5.61% -4.65%
31 8.32% -3.87% -13.42% -2.56% -1.80% -0.83%
32 6.96% -0.35% -5.93% 1.24% 3.68% -30.09%
33 4.70% -6.25% 10.40% 4.58% 3.95% -5.26%
34 1.81% 5.30% 0.70% 5.07% 7.12% -11.11%
35 2.34% 0.24% 4.43% 4.51% 4.23% 15.09%
36 -3.52% 1.60% -4.10% -5.38% 1.01% -13.62%
37 -3.05% 5.89% 7.01% -0.72% 2.11% 12.22%
38 -4.30% -2.01% -3.22% -1.30% -6.02% 3.28%
39 -7.81% -3.97% 1.20% -17.94% -6.05% 4.61%
40 10.67% 1.86% 13.99% -0.82% 5.41% -4.37%
41 -0.90% 1.12% -3.53% -1.79% -10.91% -4.01%
42 11.19% 6.98% 4.22% 11.76% 11.65% 0.81%
43 -7.35% -2.04% -5.10% -3.22% 4.01% -8.19%
44 -5.58% -2.05% -4.23% -0.50% 3.14% -3.67%
45 7.33% -9.21% -4.77% 2.04% -5.78% 3.63%
46 2.04% 7.17% 13.03% 8.46% 8.89% 5.39%
47 -3.15% 1.93% -6.67% -7.84% -0.36% 7.85%
48 0.15% 3.08% -16.06% -1.10% 3.76% 8.14%
49 3.89% 6.93% -2.66% -1.06% -0.29% 1.04%
 J K L M N O
50 0.71% 4.34% -5.69% 2.74% -1.60% 2.13%
51 -5.77% -0.63% 2.60% -0.16% 0.62% -2.31%
52 -4.63% -2.62% -9.82% -2.64% -4.14% -2.18%
53 -5.90% -2.18% 5.30% -3.94% 1.29% 9.02%
54 -3.07% -4.03% -5.36% 0.78% 5.20% 10.01%
55 -1.21% 0.63% 8.89% 4.88% 1.41% 1.60%
56 6.04% 5.48% 5.01% 1.19% 8.61% 3.28%
57 2.88% 2.93% 3.64% 11.94% 6.90% 8.08%
58 2.32% 2.55% 0.81% -0.12% 2.53% -2.03%
59 5.59% 5.13% -5.53% 5.53% 5.47% -1.23%
60 1.43% 1.00% 3.43% 2.04% 0.05% 2.60%
61 -2.85% 2.06% -4.84% -6.17% -1.50% -1.35%
62 -6.90% -0.74% -3.76% 1.41% 3.07% 0.89%
63 3.05% 16.25% 11.69% 8.10% 6.92% 15.25%
64 2.59% 7.08% 3.63% 4.60% 4.59% 1.94%
65 1.79% -2.86% 6.80% -1.27% 0.41% -4.44%
66 0.10% 7.99% 3.36% 8.69% 2.59% -1.58%
67
68 0.51% 1.25% 0.54% 0.90% 1.39% 0.38%
 A B C D E F G H
1 HIGH-BETA INDEX FROM DOW-JONES 30 COM
2 MMM AA AXP AIG CAT DD XOM
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08 519.89
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322 0.0284 0.3006
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE(Returns!B7:O66
8 MMM AA AXP AIG CAT DD XOM
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017 0.0018 0.0005
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039 0.0031 0.0020
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018 0.0014 0.0009
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017 0.0021 0.0009
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052 0.0016 0.0016
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016 0.0032 0.0010
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016 0.0010 0.0027
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029 0.0016 0.0014
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013 0.0015 0.0002
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029 0.0020 0.0017
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034 0.0026 0.0009
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020 0.0021 0.0013
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024 0.0016 0.0013
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004 0.0014 0.0009
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =5.25%/12
28 Expected index return 1.00% <-- =12%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B31:B44)}
30
31 MMM 0.82%
32 AA 1.24% <--
{=MMULT(B9:O22,TRANSPOSE(B4:O4))*(B28-B27)/(MMULT(MMULT(B4:O4,
33 AXP 0.94%
B9:O22),TRANSPOSE(B4:O4)))+B27}
34 AIG 1.00%
35 CAT 1.02%
36 DD 0.92%
37 XOM 0.88%
38 HPQ 1.18%
39 HD 0.87%
40 HON 1.15%
41 INTC 1.27%
42 IBM 1.16%
43 MCD 1.04%
44 MRK 0.83%
 I J K L M N O
M DOW-JONES
1 30 COMPONENTS
2 HPQ HD HON INTC IBM MCD MRK
3 126.75 78.37 47.55 146.76 172.03 62.88 106.93
4 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364 0.0618
5
6
O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 HPQ HD HON INTC IBM MCD MRK
9 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011 0.0005
10 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033 0.0012
11 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022 0.0010
12 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022 0.0014
13 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024 0.0004
14 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016 0.0014
15 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013 0.0009
16 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026 0.0013
17 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029 0.0000
18 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031 0.0014
19 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030 0.0012
20 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028 0.0018
21 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051 0.0009
22 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009 0.0064
23
24
25
26
27
28
29
30
31
32
27)/(MMULT(MMULT(B4:O4,
33
34
35
36
37
38
39
40
41
42
43
44
 A B C D E F G H
1 HIGH-BETA INDEX FROM DOW-JONES 30 COM
2 MMM AA AXP AIG CAT DD XOM
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08 519.89
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322 0.0284 0.3006
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE(Returns!B7:O66
8 MMM AA AXP AIG CAT DD XOM
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017 0.0018 0.0005
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039 0.0031 0.0020
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018 0.0014 0.0009
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017 0.0021 0.0009
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052 0.0016 0.0016
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016 0.0032 0.0010
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016 0.0010 0.0027
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029 0.0016 0.0014
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013 0.0015 0.0002
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029 0.0020 0.0017
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034 0.0026 0.0009
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020 0.0021 0.0013
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024 0.0016 0.0013
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004 0.0014 0.0009
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =5.25%/12
28 Expected index return 1.00% <-- =12%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B32:B45)}
30
Black-
Analyst Adjusted
Litterman Adjusted
31 opinion, portfolio
neutral returns
delta holdings
returns
32 MMM 0.82% 0.18% 1.00% 20.11%
33 AA 1.24% 0.00% 1.38% 1.88% <--
34 AXP 0.94% 0.00% 1.00% 3.74% {=MMULT(MINVERSE(B9:O22),D32
35 AIG 1.00% 0.00% 1.08% 8.68% B27)/SUM(MMULT(MINVERSE(B9:O
36 CAT 1.02% 0.00% 1.12% 2.67% 2:D45-B27))}
37 DD 0.92% 0.00% 1.02% 2.36%
38 XOM 0.88% 0.00% 0.91% 24.97%
39 HPQ 1.18% 0.00% 1.27% 6.09%
40 HD 0.87% 0.00% 0.95% 3.76%
41 HON 1.15% 0.00% 1.27% 2.28%
42 INTC 1.27% 0.00% 1.42% 7.05%
43 IBM 1.16% 0.00% 1.28% 8.26%
44 MCD 1.04% 0.00% 1.11% 3.02%
45 MRK 0.83% 0.00% 0.86% 5.13%
 A B C D E F G H
46 100.00% <-- =SUM(F32:F45)
47
48 Tracking factors: Cov(ri,rj)/Var(ri) = {=MMULT(B9:O22,B68:O81)}
49 MMM AA AXP AIG CAT DD XOM
50 MMM 1.0000 0.3201 0.4537 0.3420 0.3284 0.5811 0.1679
51 AA 0.7780 1.0000 1.0366 0.6274 0.7396 0.9791 0.7269
52 AXP 0.3520 0.3309 1.0000 0.4784 0.3475 0.4547 0.3297
53 AIG 0.4716 0.3560 0.8504 1.0000 0.3165 0.6689 0.3407
54 CAT 0.5499 0.5096 0.7500 0.3843 1.0000 0.5128 0.5996
55 DD 0.5876 0.4073 0.5926 0.4904 0.3096 1.0000 0.3718
56 XOM 0.1460 0.2601 0.3696 0.2149 0.3114 0.3199 1.0000
57 HPQ 0.4862 0.4269 1.1176 0.4938 0.5583 0.5071 0.5329
58 HD 0.4126 0.3661 0.6987 0.3949 0.2442 0.4779 0.0860
59 HON 0.6645 0.5522 1.0449 0.6038 0.5597 0.6421 0.6435
60 INTC 0.8385 0.6115 1.1454 0.6214 0.6427 0.8263 0.3195
61 IBM 0.6438 0.3916 1.0372 0.5507 0.3887 0.6774 0.4704
62 MCD 0.3428 0.4407 0.8866 0.5207 0.4609 0.5154 0.4922
63 MRK 0.1675 0.1633 0.4318 0.3307 0.0747 0.4541 0.3152
64
65
66 Below: Matrix with inverse of var(ri) on diagonal. {=MINVERSE(IF(B8:O8=A9:A22,B9:O22,0))}
67 MMM AA AXP AIG CAT DD XOM
68 MMM 319.9092 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 AA 0.0000 131.6309 0.0000 0.0000 0.0000 0.0000 0.0000
70 AXP 0.0000 0.0000 412.3375 0.0000 0.0000 0.0000 0.0000
71 AIG 0.0000 0.0000 0.0000 231.9757 0.0000 0.0000 0.0000
72 CAT 0.0000 0.0000 0.0000 0.0000 191.0455 0.0000 0.0000
73 DD 0.0000 0.0000 0.0000 0.0000 0.0000 316.3924 0.0000
74 XOM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 367.8171
75 HPQ 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 HD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
77 HON 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
78 INTC 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
79 IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
80 MCD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
81 MRK 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
 I J K L M N O
M DOW-JONES
1 30 COMPONENTS
2 HPQ HD HON INTC IBM MCD MRK
3 126.75 78.37 47.55 146.76 172.03 62.88 106.93
4 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364 0.0618
5
6
O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 HPQ HD HON INTC IBM MCD MRK
9 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011 0.0005
10 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033 0.0012
11 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022 0.0010
12 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022 0.0014
13 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024 0.0004
14 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016 0.0014
15 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013 0.0009
16 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026 0.0013
17 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029 0.0000
18 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031 0.0014
19 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030 0.0012
20 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028 0.0018
21 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051 0.0009
22 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009 0.0064
23
24
25
26
27
28
29
30

31

32
33
34
MULT(MINVERSE(B9:O22),D32:D45-
)/SUM(MMULT(MINVERSE(B9:O22),D3
35
45-B27))} 36
37
38
39
40
41
42
43
44
45
 I J K L M N O
46
47
48
49 HPQ HD HON INTC IBM MCD MRK
50 0.2273 0.2678 0.3965 0.2769 0.3714 0.2121 0.0815
51 0.4851 0.5775 0.8007 0.4908 0.5489 0.6627 0.1930
52 0.4053 0.3518 0.4837 0.2935 0.4642 0.4257 0.1629
53 0.3183 0.3534 0.4968 0.2830 0.4381 0.4443 0.2218
54 0.4370 0.2654 0.5592 0.3554 0.3755 0.4776 0.0608
55 0.2397 0.3136 0.3873 0.2759 0.3951 0.3225 0.2233
56 0.2167 0.0486 0.3339 0.0918 0.2360 0.2649 0.1333
57 1.0000 0.3681 0.6481 0.4597 0.6969 0.5245 0.2038
58 0.2651 1.0000 0.4124 0.2987 0.5106 0.5681 -0.0064
59 0.5078 0.4486 1.0000 0.3871 0.5608 0.6076 0.2249
60 0.6508 0.5869 0.6994 1.0000 0.6988 0.5971 0.1882
61 0.5648 0.5745 0.5800 0.4001 1.0000 0.5474 0.2877
62 0.3962 0.5958 0.5858 0.3186 0.5103 1.0000 0.1370
63 0.1959 -0.0085 0.2758 0.1278 0.3413 0.1743 1.0000
64
65
66
67 HPQ HD HON INTC IBM MCD MRK
68 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
71 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
72 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
73 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
74 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 149.5510 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 0.0000 207.6099 0.0000 0.0000 0.0000 0.0000 0.0000
77 0.0000 0.0000 190.8634 0.0000 0.0000 0.0000 0.0000
78 0.0000 0.0000 0.0000 105.6479 0.0000 0.0000 0.0000
79 0.0000 0.0000 0.0000 0.0000 184.5281 0.0000 0.0000
80 0.0000 0.0000 0.0000 0.0000 0.0000 197.9697 0.0000
81 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 155.5847
 A B C D E F G H
1 HIGH-BETA INDEX FROM DOW-JONES 30 COM
2 MMM AA AXP AIG CAT DD XOM
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08 519.89
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322 0.0284 0.3006
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE(Returns!B7:O66
8 MMM AA AXP AIG CAT DD XOM
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017 0.0018 0.0005
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039 0.0031 0.0020
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018 0.0014 0.0009
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017 0.0021 0.0009
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052 0.0016 0.0016
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016 0.0032 0.0010
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016 0.0010 0.0027
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029 0.0016 0.0014
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013 0.0015 0.0002
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029 0.0020 0.0017
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034 0.0026 0.0009
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020 0.0021 0.0013
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024 0.0016 0.0013
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004 0.0014 0.0009
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =2.37%/12
28 Expected index return 1.00% <-- =10%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B32:B45)}
30
Black-
Analyst Adjusted
Litterman Adjusted
31 opinion, portfolio
neutral returns
delta holdings
returns
32 MMM 0.82% 0.00% 0.77% 4.34%
33 AA 1.24% 0.00% 1.14% 2.59% <--
34 AXP 0.94% 0.00% 0.88% 5.15% {=MMULT(MINVERSE(B9:O22),D32
35 AIG 1.00% 0.00% 0.94% 11.94% B27)/SUM(MMULT(MINVERSE(B9:O
36 CAT 1.02% 0.00% 0.97% 3.68% 2:D45-B27))}
37 DD 0.92% 0.00% 0.86% 3.24%
38 XOM 0.88% 0.00% 0.87% 34.36%
39 HPQ 1.18% 0.00% 1.12% 8.38%
40 HD 0.87% -0.17% 0.70% -9.12%
41 HON 1.15% 0.00% 1.08% 3.14%
42 INTC 1.27% 0.00% 1.17% 9.70%
43 IBM 1.16% 0.00% 1.07% 11.37%
44 MCD 1.04% 0.00% 0.94% 4.16%
45 MRK 0.83% 0.00% 0.84% 7.07%
 A B C D E F G H
46 100.00% <-- =SUM(F32:F45)
47
48 Tracking factors: Cov(ri,rj)/Var(ri) = {=MMULT(B9:O22,B68:O81)}
49 MMM AA AXP AIG CAT DD XOM
50 MMM 1.0000 0.3201 0.4537 0.3420 0.3284 0.5811 0.1679
51 AA 0.7780 1.0000 1.0366 0.6274 0.7396 0.9791 0.7269
52 AXP 0.3520 0.3309 1.0000 0.4784 0.3475 0.4547 0.3297
53 AIG 0.4716 0.3560 0.8504 1.0000 0.3165 0.6689 0.3407
54 CAT 0.5499 0.5096 0.7500 0.3843 1.0000 0.5128 0.5996
55 DD 0.5876 0.4073 0.5926 0.4904 0.3096 1.0000 0.3718
56 XOM 0.1460 0.2601 0.3696 0.2149 0.3114 0.3199 1.0000
57 HPQ 0.4862 0.4269 1.1176 0.4938 0.5583 0.5071 0.5329
58 HD 0.4126 0.3661 0.6987 0.3949 0.2442 0.4779 0.0860
59 HON 0.6645 0.5522 1.0449 0.6038 0.5597 0.6421 0.6435
60 INTC 0.8385 0.6115 1.1454 0.6214 0.6427 0.8263 0.3195
61 IBM 0.6438 0.3916 1.0372 0.5507 0.3887 0.6774 0.4704
62 MCD 0.3428 0.4407 0.8866 0.5207 0.4609 0.5154 0.4922
63 MRK 0.1675 0.1633 0.4318 0.3307 0.0747 0.4541 0.3152
64
65
66 Below: Matrix with inverse of var(ri) on diagonal. {=MINVERSE(IF(B8:O8=A9:A22,B9:O22,0))}
67 MMM AA AXP AIG CAT DD XOM
68 MMM 319.9092 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 AA 0.0000 131.6309 0.0000 0.0000 0.0000 0.0000 0.0000
70 AXP 0.0000 0.0000 412.3375 0.0000 0.0000 0.0000 0.0000
71 AIG 0.0000 0.0000 0.0000 231.9757 0.0000 0.0000 0.0000
72 CAT 0.0000 0.0000 0.0000 0.0000 191.0455 0.0000 0.0000
73 DD 0.0000 0.0000 0.0000 0.0000 0.0000 316.3924 0.0000
74 XOM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 367.8171
75 HPQ 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 HD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
77 HON 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
78 INTC 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
79 IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
80 MCD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
81 MRK 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
 I J K L M N O
M DOW-JONES
1 30 COMPONENTS
2 HPQ HD HON INTC IBM MCD MRK
3 126.75 78.37 47.55 146.76 172.03 62.88 106.93
4 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364 0.0618
5
6
O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 HPQ HD HON INTC IBM MCD MRK
9 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011 0.0005
10 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033 0.0012
11 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022 0.0010
12 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022 0.0014
13 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024 0.0004
14 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016 0.0014
15 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013 0.0009
16 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026 0.0013
17 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029 0.0000
18 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031 0.0014
19 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030 0.0012
20 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028 0.0018
21 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051 0.0009
22 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009 0.0064
23
24
25
26
27
28
29
30

31

32
33
34
MULT(MINVERSE(B9:O22),D32:D45-
)/SUM(MMULT(MINVERSE(B9:O22),D3
35
45-B27))} 36
37
38
39
40
41
42
43
44
45
 I J K L M N O
46
47
48
49 HPQ HD HON INTC IBM MCD MRK
50 0.2273 0.2678 0.3965 0.2769 0.3714 0.2121 0.0815
51 0.4851 0.5775 0.8007 0.4908 0.5489 0.6627 0.1930
52 0.4053 0.3518 0.4837 0.2935 0.4642 0.4257 0.1629
53 0.3183 0.3534 0.4968 0.2830 0.4381 0.4443 0.2218
54 0.4370 0.2654 0.5592 0.3554 0.3755 0.4776 0.0608
55 0.2397 0.3136 0.3873 0.2759 0.3951 0.3225 0.2233
56 0.2167 0.0486 0.3339 0.0918 0.2360 0.2649 0.1333
57 1.0000 0.3681 0.6481 0.4597 0.6969 0.5245 0.2038
58 0.2651 1.0000 0.4124 0.2987 0.5106 0.5681 -0.0064
59 0.5078 0.4486 1.0000 0.3871 0.5608 0.6076 0.2249
60 0.6508 0.5869 0.6994 1.0000 0.6988 0.5971 0.1882
61 0.5648 0.5745 0.5800 0.4001 1.0000 0.5474 0.2877
62 0.3962 0.5958 0.5858 0.3186 0.5103 1.0000 0.1370
63 0.1959 -0.0085 0.2758 0.1278 0.3413 0.1743 1.0000
64
65
66
67 HPQ HD HON INTC IBM MCD MRK
68 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
71 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
72 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
73 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
74 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 149.5510 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 0.0000 207.6099 0.0000 0.0000 0.0000 0.0000 0.0000
77 0.0000 0.0000 190.8634 0.0000 0.0000 0.0000 0.0000
78 0.0000 0.0000 0.0000 105.6479 0.0000 0.0000 0.0000
79 0.0000 0.0000 0.0000 0.0000 184.5281 0.0000 0.0000
80 0.0000 0.0000 0.0000 0.0000 0.0000 197.9697 0.0000
81 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 155.5847
 A B C D E F G H I
1 SPOT CHECK ON VAR-COV
2 MMM AA AXP AIG CAT DD XOM HPQ
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08 519.89 126.75
4 Beta 1.07 1.37 1.06 1.17 1.98 1.06 1.13 1.6
5
6
7 Variances MRK AA MRK
8 0.0031 0.0076 0.0064 #NAME?
9
10 Covariances
11 MMM,AA 0.0024 <-- =COVAR(B17:B76,C17:C76)
12 MMM,MRK 0.0005 <-- =COVAR(B17:B76,O17:O76)
13
14
15
16 Excess returns
17 1-Aug-02 -1.00% -8.47% 0.91% -1.95% -4.76% -3.74% -4.71% -7.45%
18 3-Sep-02 -13.54% -27.21% -15.82% -13.91% -18.26% -11.75% -12.26% -15.63%
19 1-Oct-02 13.59% 12.47% 14.33% 13.23% 7.86% 12.77% 3.65% 28.14%
20 1-Nov-02 1.97% 14.35% 5.48% 3.89% 17.61% 8.03% 2.27% 18.79%
21 2-Dec-02 -5.95% -12.40% -10.72% -11.99% -11.08% -5.77% -1.30% -13.25%
22 2-Jan-03 0.24% -15.15% -0.80% -6.84% -5.52% -11.94% -3.99% -1.86%
23 3-Feb-03 0.40% 3.47% -6.96% -9.53% 4.29% -2.92% -1.42% -11.54%
24 3-Mar-03 2.87% -6.54% -2.34% 0.24% 2.21% 5.16% 0.96% -3.58%
25 1-Apr-03 -3.88% 16.54% 11.97% 15.68% 5.01% 8.36% -1.00% 2.53%
26 1-May-03 0.09% 6.09% 8.27% -0.30% -3.22% -0.76% 2.35% 15.73%
27 2-Jun-03 1.18% 2.61% -0.94% -4.87% 4.14% -1.85% -3.07% 7.07%
28 1-Jul-03 7.57% 7.62% 4.41% 14.97% 17.48% 4.73% -2.63% -2.81%
29 1-Aug-03 1.30% 2.40% 0.66% -7.67% 3.91% 1.96% 4.75% -8.20%
30 2-Sep-03 -3.86% -9.71% -1.28% -3.25% -6.61% -11.84% -4.66% -4.68%
31 1-Oct-03 12.49% 17.84% 2.99% 5.09% 4.37% 0.33% -1.77% 12.02%
32 3-Nov-03 -0.13% 3.37% -3.94% -5.02% 1.34% 2.78% -2.07% -4.73%
33 1-Dec-03 6.54% 13.74% 4.26% 13.35% 6.41% 9.52% 10.74% 3.67%
34 2-Jan-04 -8.02% -11.52% 5.92% 4.51% -7.97% -5.10% -2.24% 1.36%
35 2-Feb-04 -1.69% 8.66% 1.70% 6.16% -5.46% 2.81% 2.24% -6.79%
36 1-Mar-04 4.05% -8.63% -4.11% -3.73% 1.93% -7.23% -3.09% -1.25%
37 1-Apr-04 4.70% -13.02% -7.06% 0.24% -3.60% 1.07% 0.57% -16.94%
38 3-May-04 -2.58% 1.32% 2.19% 2.10% -5.46% 0.76% 0.57% 5.34%
39 1-Jun-04 5.47% 4.42% 0.24% -2.87% 2.93% 2.14% 0.92% -2.46%
40 1-Jul-04 -9.66% -4.02% -3.53% -1.06% -9.63% -4.22% 2.45% -6.78%
41 2-Aug-04 -0.32% 0.64% -1.78% 0.64% -3.45% -1.25% -1.56% -14.04%
42 1-Sep-04 -3.72% 2.71% 1.52% -4.74% 7.78% 0.61% 3.02% 2.96%
43 1-Oct-04 -3.81% -4.25% 2.02% -11.51% -1.73% -0.48% 0.10% -2.66%
44 1-Nov-04 2.24% 3.98% 3.55% 4.07% 10.46% 5.69% 2.87% 4.76%
45 1-Dec-04 2.29% -8.82% -0.13% 3.54% 3.94% 7.24% -1.69% 2.95%
46 3-Jan-05 1.97% -7.18% -6.61% 0.75% -10.96% -3.73% -1.06% -8.95%
47 1-Feb-05 -0.77% 8.03% 0.20% 0.59% 4.11% 11.43% 19.23% 3.78%
48 1-Mar-05 1.29% -6.49% -6.34% -18.69% -6.23% -4.59% -7.75% 3.59%
49 1-Apr-05 -12.16% -5.54% 1.25% -8.76% -5.66% -9.05% -6.12% -9.11%
 A B C D E F G H I
50 2-May-05 0.01% -7.29% 0.84% 8.66% 4.29% -1.16% -2.69% 7.35%
51 1-Jun-05 -6.62% -4.59% -2.24% 4.53% -1.09% -8.47% 0.53% 2.53%
52 1-Jul-05 2.90% 6.14% 1.97% 3.36% 10.44% -1.43% 0.48% 2.45%
53 1-Aug-05 -5.45% -5.01% -0.86% -1.59% 0.54% -7.36% 0.71% 9.83%
54 1-Sep-05 2.28% -10.24% 2.58% 4.38% 3.35% -1.65% 4.18% 3.16%
55 3-Oct-05 2.73% -1.46% -2.08% 4.30% -12.97% 5.56% -14.10% -6.22%
56 1-Nov-05 2.99% 11.72% 1.95% 3.37% 7.05% 2.74% 2.11% 3.50%
57 1-Dec-05 -2.02% 6.66% -1.23% 1.42% -2.38% -1.25% -4.97% -5.47%
58 3-Jan-06 -7.11% 5.37% 0.83% -4.32% 14.20% -8.87% 9.36% 6.34%
59 1-Feb-06 1.00% -7.65% 1.39% 1.19% 4.99% 3.01% -6.72% 2.93%
60 1-Mar-06 2.04% 3.20% -3.81% -0.36% -4.11% 4.14% 0.75% -1.64%
61 3-Apr-06 11.33% 9.05% 1.29% -1.46% 3.29% 3.71% 1.87% -3.47%
62 1-May-06 -2.34% -6.80% -0.29% -7.00% -6.11% -3.45% -4.71% -2.45%
63 1-Jun-06 -4.29% 1.06% -3.42% -3.10% -0.29% -2.86% -1.00% -4.09%
64 3-Jul-06 -14.51% -8.70% -3.23% 2.52% -6.89% -5.43% 8.20% -1.44%
65 1-Aug-06 1.70% -5.06% -0.40% 5.15% -8.95% 1.05% -1.36% 11.43%
66 1-Sep-06 2.96% -2.89% 5.23% 3.57% -3.19% 6.29% -2.56% -1.59%
67 2-Oct-06 4.99% 2.09% 1.99% 1.18% -9.98% 6.02% 4.53% 3.27%
68 1-Nov-06 3.06% 7.10% 0.27% 4.65% -0.19% 2.58% 5.99% -0.34%
69 1-Dec-06 -5.21% -4.55% 1.95% 1.70% -3.49% 3.06% -1.95% 2.34%
70 3-Jan-07 -5.55% 6.91% -5.18% -4.77% 2.51% 1.08% -5.07% 2.78%
71 1-Feb-07 -0.43% 2.45% -3.65% -1.90% -1.81% 2.41% -4.62% -11.70%
72 1-Mar-07 2.34% 0.49% -2.14% -0.02% 1.60% -3.25% 3.42% 0.03%
73 2-Apr-07 7.20% 3.66% 6.26% 3.74% 6.09% -1.19% 3.36% 2.70%
74 1-May-07 5.86% 14.65% 5.56% 3.47% 5.52% 6.29% 3.38% 5.96%
75 1-Jun-07 -2.11% -2.78% -7.33% -3.43% -2.72% -3.52% -0.87% -4.41%
76 2-Jul-07 3.09% 5.15% 4.24% -1.60% 4.13% 2.79% 7.46% 6.25%
 J K L M N O
K ON VAR-COV
1
2 HD HON INTC IBM MCD MRK
3 78.37 47.55 146.76 172.03 62.88 106.93
4 1.2 1.3 1.9 1.81 1.37 1.16
5
6
7
8
9
10
11
12
13
14
15
16
17 5.92% -8.42% -12.36% 6.16% -5.46% 1.45%
18 -23.59% -33.64% -18.85% -26.57% -31.04% -9.65%
19 9.61% 8.76% 21.44% 29.40% 1.12% 16.73%
20 -9.49% 7.85% 18.38% 8.92% 2.12% 8.72%
21 -9.72% -9.28% -29.88% -12.37% -15.43% -4.60%
22 -14.43% 0.53% 0.07% 0.00% -13.53% -2.56%
23 11.01% -7.00% 9.21% -1.03% -5.90% -5.26%
24 3.56% -8.17% -6.33% -0.28% 4.62% 4.09%
25 13.91% 8.74% 11.70% 7.03% 15.37% 5.65%
26 13.90% 9.94% 11.94% 2.93% 7.73% -4.95%
27 1.58% 1.22% -0.59% -7.40% 14.97% 8.81%
28 -6.47% 3.94% 17.35% -2.42% 2.83% -9.49%
29 2.52% 1.87% 13.42% 0.24% -4.01% -4.29%
30 -1.26% -10.79% -4.37% 6.52% 3.50% 0.96%
31 14.68% 13.75% 17.47% 0.40% 4.62% -13.83%
32 -1.36% -3.69% 1.30% 0.47% 2.63% -9.01%
33 -3.82% 10.62% -5.06% 1.44% -4.56% 13.42%
34 -0.57% 6.50% -5.45% 5.93% 2.19% 2.60%
35 1.83% -3.76% -4.83% -3.53% 8.11% 0.63%
36 2.54% -4.74% -7.62% -5.85% -0.46% -8.04%
37 -6.48% 0.91% -6.10% -4.97% -6.20% 5.77%
38 1.53% -3.26% 9.99% -0.22% -4.49% 0.25%
39 -2.27% 7.06% -3.90% -1.40% -2.90% 0.82%
40 -4.81% 1.39% -12.94% -2.12% 4.22% -5.04%
41 7.81% -5.12% -13.96% -3.46% -3.19% -1.21%
42 6.46% -1.61% -6.47% 0.34% 2.28% -30.47%
43 4.19% -7.51% 9.86% 3.68% 2.55% -5.64%
44 1.30% 4.05% 0.16% 4.17% 5.72% -11.49%
45 1.83% -1.01% 3.89% 3.61% 2.84% 14.71%
46 -4.02% 0.34% -4.64% -6.27% -0.39% -14.00%
47 -3.55% 4.64% 6.47% -1.62% 0.71% 11.84%
48 -4.81% -3.26% -3.76% -2.19% -7.42% 2.89%
49 -8.32% -5.22% 0.66% -18.84% -7.45% 4.23%
 J K L M N O
50 10.17% 0.61% 13.45% -1.72% 4.02% -4.76%
51 -1.41% -0.13% -4.07% -2.69% -12.31% -4.39%
52 10.68% 5.73% 3.68% 10.86% 10.26% 0.42%
53 -7.86% -3.29% -5.64% -4.12% 2.62% -8.58%
54 -6.09% -3.31% -4.77% -1.39% 1.75% -4.06%
55 6.83% -10.46% -5.31% 1.15% -7.18% 3.25%
56 1.54% 5.92% 12.49% 7.57% 7.49% 5.01%
57 -3.66% 0.68% -7.21% -8.74% -1.76% 7.47%
58 -0.35% 1.83% -16.60% -2.00% 2.36% 7.76%
59 3.38% 5.67% -3.19% -1.96% -1.69% 0.65%
60 0.20% 3.09% -6.23% 1.84% -2.99% 1.75%
61 -6.27% -1.88% 2.06% -1.06% -0.77% -2.70%
62 -5.14% -3.87% -10.36% -3.54% -5.54% -2.56%
63 -6.41% -3.43% 4.76% -4.83% -0.11% 8.64%
64 -3.58% -5.28% -5.90% -0.12% 3.80% 9.63%
65 -1.72% -0.62% 8.36% 3.99% 0.01% 1.22%
66 5.54% 4.23% 4.47% 0.29% 7.21% 2.90%
67 2.37% 1.68% 3.10% 11.05% 5.51% 7.69%
68 1.81% 1.29% 0.27% -1.02% 1.14% -2.41%
69 5.09% 3.88% -6.07% 4.63% 4.08% -1.61%
70 0.92% -0.25% 2.89% 1.14% -1.35% 2.22%
71 -3.35% 0.80% -5.38% -7.06% -2.89% -1.73%
72 -7.41% -1.99% -4.30% 0.51% 1.67% 0.51%
73 2.54% 14.99% 11.15% 7.20% 5.53% 14.86%
74 2.09% 5.83% 3.09% 3.70% 3.20% 1.56%
75 1.29% -4.11% 6.26% -2.17% -0.98% -4.82%
76 -0.40% 6.74% 2.82% 7.80% 1.19% -1.96%
 A B C D E F G
1 HIGH-BETA INDEX FROM DOW-JONES 30 CO
2 MMM AA AXP AIG CAT DD
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322 0.0284
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE(Returns!B7:O6
8 MMM AA AXP AIG CAT DD
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017 0.0018
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039 0.0031
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018 0.0014
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017 0.0021
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052 0.0016
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016 0.0032
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016 0.0010
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029 0.0016
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013 0.0015
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029 0.0020
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034 0.0026
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020 0.0021
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024 0.0016
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004 0.0014
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =5.25%/12
28 Expected index return 1.00% <-- =12%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B32:B45)}
30

Black- Analyst Adjusted

Adjusted
31 Litterman opinion, portfolio
returns
neutral returns delta holdings

32 MMM 0.82% 0.00% 0.82% 3.80%

33 AA 1.24% 0.00% 1.24% 2.26% <--
34 AXP 0.94% 0.00% 0.94% 4.51% {=MMULT(MINVERSE(B9:O22),
35 AIG 1.00% 0.00% 1.00% 10.45% B27)/SUM(MMULT(MINVERSE(
36 CAT 1.02% 0.00% 1.02% 3.22% 2:D45-B27))}
37 DD 0.92% 0.00% 0.92% 2.84%
38 XOM 0.88% 0.00% 0.88% 30.06%
39 HPQ 1.18% 0.00% 1.18% 7.33%
40 HD 0.87% 0.00% 0.87% 4.53%
41 HON 1.15% 0.00% 1.15% 2.75%
42 INTC 1.27% 0.00% 1.27% 8.49%
43
IBM 1.16% 0.00% 1.16% 9.95%
44 MCD 1.04% 0.00% 1.04% 3.64%
 A B C D E F G
45 MRK 0.83% 0.00% 0.83% 6.18%
46 100.00% <-- =SUM(F32:F45)
47
48 Tracking factors: Cov(ri,rj)/Var(ri) = {=MMULT(B9:O22,B68:O81)}
49 MMM AA AXP AIG CAT DD
50 MMM 1.0000 0.3201 0.4537 0.3420 0.3284 0.5811
51 AA 0.7780 1.0000 1.0366 0.6274 0.7396 0.9791
52 AXP 0.3520 0.3309 1.0000 0.4784 0.3475 0.4547
53 AIG 0.4716 0.3560 0.8504 1.0000 0.3165 0.6689
54 CAT 0.5499 0.5096 0.7500 0.3843 1.0000 0.5128
55 DD 0.5876 0.4073 0.5926 0.4904 0.3096 1.0000
56 XOM 0.1460 0.2601 0.3696 0.2149 0.3114 0.3199
57 HPQ 0.4862 0.4269 1.1176 0.4938 0.5583 0.5071
58 HD 0.4126 0.3661 0.6987 0.3949 0.2442 0.4779
59 HON 0.6645 0.5522 1.0449 0.6038 0.5597 0.6421
60 INTC 0.8385 0.6115 1.1454 0.6214 0.6427 0.8263
61 IBM 0.6438 0.3916 1.0372 0.5507 0.3887 0.6774
62 MCD 0.3428 0.4407 0.8866 0.5207 0.4609 0.5154
63 MRK 0.1675 0.1633 0.4318 0.3307 0.0747 0.4541
64
65
66 Below: Matrix with inverse of var(ri) on diagonal. {=MINVERSE(IF(B8:O8=A9:A22,B9:O22,0))}
67 MMM AA AXP AIG CAT DD
68 MMM 319.9092 0.0000 0.0000 0.0000 0.0000 0.0000
69 AA 0.0000 131.6309 0.0000 0.0000 0.0000 0.0000
70 AXP 0.0000 0.0000 412.3375 0.0000 0.0000 0.0000
71 AIG 0.0000 0.0000 0.0000 231.9757 0.0000 0.0000
72 CAT 0.0000 0.0000 0.0000 0.0000 191.0455 0.0000
73 DD 0.0000 0.0000 0.0000 0.0000 0.0000 316.3924
74 XOM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 HPQ 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 HD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
77 HON 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
78 INTC 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
79 IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
80 MCD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
81 MRK 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
 H I J K L M N O
FROM DOW-JONES
1 30 COMPONENTS
2 XOM HPQ HD HON INTC IBM MCD MRK
3 519.89 126.75 78.37 47.55 146.76 172.03 62.88 106.93
4 0.3006 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364 0.0618
5
6
eturns!B7:O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 XOM HPQ HD HON INTC IBM MCD MRK
9 0.0005 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011 0.0005
10 0.0020 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033 0.0012
11 0.0009 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022 0.0010
12 0.0009 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022 0.0014
13 0.0016 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024 0.0004
14 0.0010 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016 0.0014
15 0.0027 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013 0.0009
16 0.0014 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026 0.0013
17 0.0002 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029 0.0000
18 0.0017 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031 0.0014
19 0.0009 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030 0.0012
20 0.0013 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028 0.0018
21 0.0013 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051 0.0009
22 0.0009 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009 0.0064
23
24
25
26
27
28
29
30

31

32
<-- 33
34
{=MMULT(MINVERSE(B9:O22),D32:D45-
B27)/SUM(MMULT(MINVERSE(B9:O22),D3
35
2:D45-B27))}
36
37
38
39
40
41
42
43
44
 H I J K L M N O
45
<-- =SUM(F32:F45)
46
47
48
49 XOM HPQ HD HON INTC IBM MCD MRK
50 0.1679 0.2273 0.2678 0.3965 0.2769 0.3714 0.2121 0.0815
51 0.7269 0.4851 0.5775 0.8007 0.4908 0.5489 0.6627 0.1930
52 0.3297 0.4053 0.3518 0.4837 0.2935 0.4642 0.4257 0.1629
53 0.3407 0.3183 0.3534 0.4968 0.2830 0.4381 0.4443 0.2218
54 0.5996 0.4370 0.2654 0.5592 0.3554 0.3755 0.4776 0.0608
55 0.3718 0.2397 0.3136 0.3873 0.2759 0.3951 0.3225 0.2233
56 1.0000 0.2167 0.0486 0.3339 0.0918 0.2360 0.2649 0.1333
57 0.5329 1.0000 0.3681 0.6481 0.4597 0.6969 0.5245 0.2038
58 0.0860 0.2651 1.0000 0.4124 0.2987 0.5106 0.5681 -0.0064
59 0.6435 0.5078 0.4486 1.0000 0.3871 0.5608 0.6076 0.2249
60 0.3195 0.6508 0.5869 0.6994 1.0000 0.6988 0.5971 0.1882
61 0.4704 0.5648 0.5745 0.5800 0.4001 1.0000 0.5474 0.2877
62 0.4922 0.3962 0.5958 0.5858 0.3186 0.5103 1.0000 0.1370
63 0.3152 0.1959 -0.0085 0.2758 0.1278 0.3413 0.1743 1.0000
64
65
A9:A22,B9:O22,0))}
66
67 XOM HPQ HD HON INTC IBM MCD MRK
68 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
71 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
72 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
73 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
74 367.8171 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 0.0000 149.5510 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 0.0000 0.0000 207.6099 0.0000 0.0000 0.0000 0.0000 0.0000
77 0.0000 0.0000 0.0000 190.8634 0.0000 0.0000 0.0000 0.0000
78 0.0000 0.0000 0.0000 0.0000 105.6479 0.0000 0.0000 0.0000
79 0.0000 0.0000 0.0000 0.0000 0.0000 184.5281 0.0000 0.0000
80 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 197.9697 0.0000
81 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 155.5847
 A B C D E F G
1 HIGH-BETA INDEX FROM DOW-JONES 30 C
2 MMM AA AXP AIG CAT DD
3 Market cap 65.66 39.11 77.91 180.72 55.7 49.08
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322 0.0284
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE(Returns!B7:
8 MMM AA AXP AIG CAT DD
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017 0.0018
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039 0.0031
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018 0.0014
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017 0.0021
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052 0.0016
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016 0.0032
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016 0.0010
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029 0.0016
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013 0.0015
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029 0.0020
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034 0.0026
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020 0.0021
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024 0.0016
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004 0.0014
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =5.25%/12
28 Expected index return 1.00% <-- =12%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B32:B45)}
30

Black- Analyst Adjusted

Adjusted
31 Litterman opinion, portfolio
returns
neutral returns delta holdings

32
MMM 0.82%
0.00% 0.93% 3.47%
33 AA 1.24% 0.25% 1.51% 12.73% <--
34 AXP 0.94% 0.00% 1.05% 4.12% {=MMULT(MINVERSE(B9:O
35 AIG 1.00% 0.00% 1.11% 9.55% B27)/SUM(MMULT(MINVER
36 CAT 1.02% 0.00% 1.12% 2.94% 2:D45-B27))}
37 DD 0.92% 0.00% 1.03% 2.59%
38 XOM 0.88% -0.13% 0.82% 11.98%
39 HPQ 1.18% 0.00% 1.29% 6.70%
40 HD 0.87% 0.20% 1.15% 17.59%
41 HON 1.15% 0.00% 1.30% 2.51%
42 INTC 1.27% 0.00% 1.50% 7.75%
43 IBM 1.16% 0.00% 1.32% 9.09%
44 MCD 1.04% 0.00% 1.21% 3.32%
 A B C D E F G
45 MRK 0.83% 0.00% 0.83% 5.65%
46 100.00% <-- =SUM(F32:F45)
47
48 Tracking factors: Cov(ri,rj)/Var(ri) = {=MMULT(B9:O22,B68:O81)}
49 MMM AA AXP AIG CAT DD
50 MMM 1.0000 0.3201 0.4537 0.3420 0.3284 0.5811
51 AA 0.7780 1.0000 1.0366 0.6274 0.7396 0.9791
52 AXP 0.3520 0.3309 1.0000 0.4784 0.3475 0.4547
53 AIG 0.4716 0.3560 0.8504 1.0000 0.3165 0.6689
54 CAT 0.5499 0.5096 0.7500 0.3843 1.0000 0.5128
55 DD 0.5876 0.4073 0.5926 0.4904 0.3096 1.0000
56 XOM 0.1460 0.2601 0.3696 0.2149 0.3114 0.3199
57 HPQ 0.4862 0.4269 1.1176 0.4938 0.5583 0.5071
58 HD 0.4126 0.3661 0.6987 0.3949 0.2442 0.4779
59 HON 0.6645 0.5522 1.0449 0.6038 0.5597 0.6421
60 INTC 0.8385 0.6115 1.1454 0.6214 0.6427 0.8263
61 IBM 0.6438 0.3916 1.0372 0.5507 0.3887 0.6774
62 MCD 0.3428 0.4407 0.8866 0.5207 0.4609 0.5154
63 MRK 0.1675 0.1633 0.4318 0.3307 0.0747 0.4541
64
65
66 Below: Matrix with inverse of var(ri) on diagonal. {=MINVERSE(IF(B8:O8=A9:A22,B9:O22,0))}
67 MMM AA AXP AIG CAT DD
68 MMM 319.9092 0.0000 0.0000 0.0000 0.0000 0.0000
69 AA 0.0000 131.6309 0.0000 0.0000 0.0000 0.0000
70 AXP 0.0000 0.0000 412.3375 0.0000 0.0000 0.0000
71 AIG 0.0000 0.0000 0.0000 231.9757 0.0000 0.0000
72 CAT 0.0000 0.0000 0.0000 0.0000 191.0455 0.0000
73 DD 0.0000 0.0000 0.0000 0.0000 0.0000 316.3924
74 XOM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 HPQ 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 HD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
77 HON 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
78 INTC 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
79 IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
80 MCD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
81 MRK 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
 H I J K L M N O
FROM DOW-JONES
1 30 COMPONENTS
2 XOM HPQ HD HON INTC IBM MCD MRK
3 519.89 126.75 78.37 47.55 146.76 172.03 62.88 106.93
4 0.3006 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364 0.0618
5
6
rns!B7:O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 XOM HPQ HD HON INTC IBM MCD MRK
9 0.0005 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011 0.0005
10 0.0020 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033 0.0012
11 0.0009 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022 0.0010
12 0.0009 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022 0.0014
13 0.0016 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024 0.0004
14 0.0010 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016 0.0014
15 0.0027 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013 0.0009
16 0.0014 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026 0.0013
17 0.0002 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029 0.0000
18 0.0017 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031 0.0014
19 0.0009 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030 0.0012
20 0.0013 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028 0.0018
21 0.0013 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051 0.0009
22 0.0009 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009 0.0064
23
24
25
26
27
28
29
30

31

32

<-- 33
34
{=MMULT(MINVERSE(B9:O22),D32:D45-
B27)/SUM(MMULT(MINVERSE(B9:O22),D3
35
2:D45-B27))}
36
37
38
39
40
41
42
43
44
 H I J K L M N O
45
<-- =SUM(F32:F45)
46
47
48
49 XOM HPQ HD HON INTC IBM MCD MRK
50 0.1679 0.2273 0.2678 0.3965 0.2769 0.3714 0.2121 0.0815
51 0.7269 0.4851 0.5775 0.8007 0.4908 0.5489 0.6627 0.1930
52 0.3297 0.4053 0.3518 0.4837 0.2935 0.4642 0.4257 0.1629
53 0.3407 0.3183 0.3534 0.4968 0.2830 0.4381 0.4443 0.2218
54 0.5996 0.4370 0.2654 0.5592 0.3554 0.3755 0.4776 0.0608
55 0.3718 0.2397 0.3136 0.3873 0.2759 0.3951 0.3225 0.2233
56 1.0000 0.2167 0.0486 0.3339 0.0918 0.2360 0.2649 0.1333
57 0.5329 1.0000 0.3681 0.6481 0.4597 0.6969 0.5245 0.2038
58 0.0860 0.2651 1.0000 0.4124 0.2987 0.5106 0.5681 -0.0064
59 0.6435 0.5078 0.4486 1.0000 0.3871 0.5608 0.6076 0.2249
60 0.3195 0.6508 0.5869 0.6994 1.0000 0.6988 0.5971 0.1882
61 0.4704 0.5648 0.5745 0.5800 0.4001 1.0000 0.5474 0.2877
62 0.4922 0.3962 0.5958 0.5858 0.3186 0.5103 1.0000 0.1370
63 0.3152 0.1959 -0.0085 0.2758 0.1278 0.3413 0.1743 1.0000
64
65
66
67 XOM HPQ HD HON INTC IBM MCD MRK
68 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
71 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
72 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
73 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
74 367.8171 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 0.0000 149.5510 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
76 0.0000 0.0000 207.6099 0.0000 0.0000 0.0000 0.0000 0.0000
77 0.0000 0.0000 0.0000 190.8634 0.0000 0.0000 0.0000 0.0000
78 0.0000 0.0000 0.0000 0.0000 105.6479 0.0000 0.0000 0.0000
79 0.0000 0.0000 0.0000 0.0000 0.0000 184.5281 0.0000 0.0000
80 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 197.9697 0.0000
81 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 155.5847
 A B C D E F
1 HIGH-BETA INDEX FROM DOW-JON
2 MMM AA AXP AIG CAT
3 Market cap 65.66 39.11 77.91 180.72 55.7
4 Weight 0.0380 0.0226 0.0451 0.1045 0.0322
5
6
7 The var-cov matrix is computed by {=MMULT(TRANSPOSE(Returns!B7:O66-AVERAGE
8 MMM AA AXP AIG CAT
9 MMM 0.0031 0.0024 0.0011 0.0015 0.0017
10 AA 0.0024 0.0076 0.0025 0.0027 0.0039
11 AXP 0.0011 0.0025 0.0024 0.0021 0.0018
12 AIG 0.0015 0.0027 0.0021 0.0043 0.0017
13 CAT 0.0017 0.0039 0.0018 0.0017 0.0052
14 DD 0.0018 0.0031 0.0014 0.0021 0.0016
15 XOM 0.0005 0.0020 0.0009 0.0009 0.0016
16 HPQ 0.0015 0.0032 0.0027 0.0021 0.0029
17 HD 0.0013 0.0028 0.0017 0.0017 0.0013
18 HON 0.0021 0.0042 0.0025 0.0026 0.0029
19 INTC 0.0026 0.0046 0.0028 0.0027 0.0034
20 IBM 0.0020 0.0030 0.0025 0.0024 0.0020
21 MCD 0.0011 0.0033 0.0022 0.0022 0.0024
22 MRK 0.0005 0.0012 0.0010 0.0014 0.0004
23
24
25 Computing the expected returns using Black-Litterman
26
27 Risk-free 0.44% <-- =5.25%/12
28 Expected index return 1.00% <-- =12%/12
29 Check:
Index return 1.00% <-- {=SUMPRODUCT(TRANSPOSE(B4:O4),B32:B45)}
30

Black- Analyst Adjusted

Adjusted
31 Litterman opinion, portfolio
returns
neutral returns delta holdings

32 MMM 0.82% 0.15% 0.98% 20.29%

33 AA 1.24% 0.00% 1.31% 2.21%
34 AXP 0.94% 0.00% 0.99% 4.39%
35 AIG 1.00% 0.00% 1.06% 10.19%
36 CAT 1.02% 0.00% 1.06% 3.14%
37 DD 0.92% 0.00% 0.98% 2.77%
38 XOM 0.88% -0.16% 0.76% 8.97%
39 HPQ 1.18% 0.05% 1.26% 9.73%
40 HD 0.87% 0.00% 0.96% 4.42%
41 HON 1.15% 0.00% 1.22% 2.68%
42 INTC 1.27% 0.10% 1.48% 11.93%
43 IBM 1.16% 0.00% 1.25% 9.70%
44 MCD 1.04% 0.00% 1.07% 3.55%
45 MRK 0.83% 0.00% 0.83% 6.03%
 A B C D E F
46 100.00%
47
48 Tracking factors: Cov(ri,rj)/Var(ri) = {=MMULT(B9:O22,B68:O81)}
49 MMM AA AXP AIG CAT
50 MMM 1.0000 0.3201 0.4537 0.3420 0.3284
51 AA 0.7780 1.0000 1.0366 0.6274 0.7396
52 AXP 0.3520 0.3309 1.0000 0.4784 0.3475
53 AIG 0.4716 0.3560 0.8504 1.0000 0.3165
54 CAT 0.5499 0.5096 0.7500 0.3843 1.0000
55 DD 0.5876 0.4073 0.5926 0.4904 0.3096
56 XOM 0.1460 0.2601 0.3696 0.2149 0.3114
57 HPQ 0.4862 0.4269 1.1176 0.4938 0.5583
58 HD 0.4126 0.3661 0.6987 0.3949 0.2442
59 HON 0.6645 0.5522 1.0449 0.6038 0.5597
60 INTC 0.8385 0.6115 1.1454 0.6214 0.6427
61 IBM 0.6438 0.3916 1.0372 0.5507 0.3887
62 MCD 0.3428 0.4407 0.8866 0.5207 0.4609
63 MRK 0.1675 0.1633 0.4318 0.3307 0.0747
64
65
66 Below: Matrix with inverse of var(ri) on diagonal. {=MINVERSE(IF(B8:O8=A9:A22,B9:O22,0))}
67 MMM AA AXP AIG CAT
68 MMM 319.9092 0.0000 0.0000 0.0000 0.0000
69 AA 0.0000 131.6309 0.0000 0.0000 0.0000
70 AXP 0.0000 0.0000 412.3375 0.0000 0.0000
71 AIG 0.0000 0.0000 0.0000 231.9757 0.0000
72 CAT 0.0000 0.0000 0.0000 0.0000 191.0455
73 DD 0.0000 0.0000 0.0000 0.0000 0.0000
74 XOM 0.0000 0.0000 0.0000 0.0000 0.0000
75 HPQ 0.0000 0.0000 0.0000 0.0000 0.0000
76 HD 0.0000 0.0000 0.0000 0.0000 0.0000
77 HON 0.0000 0.0000 0.0000 0.0000 0.0000
78 INTC 0.0000 0.0000 0.0000 0.0000 0.0000
79 IBM 0.0000 0.0000 0.0000 0.0000 0.0000
80 MCD 0.0000 0.0000 0.0000 0.0000 0.0000
81 MRK 0.0000 0.0000 0.0000 0.0000 0.0000
 G H I J K L M N
NDEX FROM
1 DOW-JONES 30 COMPONENTS
2 DD XOM HPQ HD HON INTC IBM MCD
3 49.08 519.89 126.75 78.37 47.55 146.76 172.03 62.88
4 0.0284 0.3006 0.0733 0.0453 0.0275 0.0849 0.0995 0.0364
5
6
POSE(Returns!B7:O66-AVERAGE(Returns!B7:O66)),Returns!B7:O66-AVERAGE(Returns!B7:O66))/60}
7
8 DD XOM HPQ HD HON INTC IBM MCD
9 0.0018 0.0005 0.0015 0.0013 0.0021 0.0026 0.0020 0.0011
10 0.0031 0.0020 0.0032 0.0028 0.0042 0.0046 0.0030 0.0033
11 0.0014 0.0009 0.0027 0.0017 0.0025 0.0028 0.0025 0.0022
12 0.0021 0.0009 0.0021 0.0017 0.0026 0.0027 0.0024 0.0022
13 0.0016 0.0016 0.0029 0.0013 0.0029 0.0034 0.0020 0.0024
14 0.0032 0.0010 0.0016 0.0015 0.0020 0.0026 0.0021 0.0016
15 0.0010 0.0027 0.0014 0.0002 0.0017 0.0009 0.0013 0.0013
16 0.0016 0.0014 0.0067 0.0018 0.0034 0.0044 0.0038 0.0026
17 0.0015 0.0002 0.0018 0.0048 0.0022 0.0028 0.0028 0.0029
18 0.0020 0.0017 0.0034 0.0022 0.0052 0.0037 0.0030 0.0031
19 0.0026 0.0009 0.0044 0.0028 0.0037 0.0095 0.0038 0.0030
20 0.0021 0.0013 0.0038 0.0028 0.0030 0.0038 0.0054 0.0028
21 0.0016 0.0013 0.0026 0.0029 0.0031 0.0030 0.0028 0.0051
22 0.0014 0.0009 0.0013 0.0000 0.0014 0.0012 0.0018 0.0009
23
24
25
26
27
28
29
30

31
1.09%
32
33 <--
34 {=MMULT(MINVERSE(B9:O22),D32:D45-
35 B27)/SUM(MMULT(MINVERSE(B9:O22),D3
36 2:D45-B27))}
37
38
39
40
41
42
43
44
45
 G H I J K L M N
46 <-- =SUM(F32:F45)
47
48
49 DD XOM HPQ HD HON INTC IBM MCD
50 0.5811 0.1679 0.2273 0.2678 0.3965 0.2769 0.3714 0.2121
51 0.9791 0.7269 0.4851 0.5775 0.8007 0.4908 0.5489 0.6627
52 0.4547 0.3297 0.4053 0.3518 0.4837 0.2935 0.4642 0.4257
53 0.6689 0.3407 0.3183 0.3534 0.4968 0.2830 0.4381 0.4443
54 0.5128 0.5996 0.4370 0.2654 0.5592 0.3554 0.3755 0.4776
55 1.0000 0.3718 0.2397 0.3136 0.3873 0.2759 0.3951 0.3225
56 0.3199 1.0000 0.2167 0.0486 0.3339 0.0918 0.2360 0.2649
57 0.5071 0.5329 1.0000 0.3681 0.6481 0.4597 0.6969 0.5245
58 0.4779 0.0860 0.2651 1.0000 0.4124 0.2987 0.5106 0.5681
59 0.6421 0.6435 0.5078 0.4486 1.0000 0.3871 0.5608 0.6076
60 0.8263 0.3195 0.6508 0.5869 0.6994 1.0000 0.6988 0.5971
61 0.6774 0.4704 0.5648 0.5745 0.5800 0.4001 1.0000 0.5474
62 0.5154 0.4922 0.3962 0.5958 0.5858 0.3186 0.5103 1.0000
63 0.4541 0.3152 0.1959 -0.0085 0.2758 0.1278 0.3413 0.1743
64
65
66
67 DD XOM HPQ HD HON INTC IBM MCD
68 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
69 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
71 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
72 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
73 316.3924 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
74 0.0000 367.8171 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
75 0.0000 0.0000 149.5510 0.0000 0.0000 0.0000 0.0000 0.0000
76 0.0000 0.0000 0.0000 207.6099 0.0000 0.0000 0.0000 0.0000
77 0.0000 0.0000 0.0000 0.0000 190.8634 0.0000 0.0000 0.0000
78 0.0000 0.0000 0.0000 0.0000 0.0000 105.6479 0.0000 0.0000
79 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 184.5281 0.0000
80 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 197.9697
81 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
 O
1
2 MRK
3 106.93
4 0.0618
5
6
7
8 MRK
9 0.0005
10 0.0012
11 0.0010
12 0.0014
13 0.0004
14 0.0014
15 0.0009
16 0.0013
17 0.0000
18 0.0014
19 0.0012
20 0.0018
21 0.0009
22 0.0064
23
24
25
26
27
28
29
30

31

32
33
34
35
36
37
38
39
40
41
42
43
44
45
 O
46
47
48
49 MRK
50 0.0815
51 0.1930
52 0.1629
53 0.2218
54 0.0608
55 0.2233
56 0.1333
57 0.2038
58 -0.0064
59 0.2249
60 0.1882
61 0.2877
62 0.1370
63 1.0000
64
65
66
67 MRK
68 0.0000
69 0.0000
70 0.0000
71 0.0000
72 0.0000
73 0.0000
74 0.0000
75 0.0000
76 0.0000
77 0.0000
78 0.0000
79 0.0000
80 0.0000
81 155.5847