Category Blog

Efficient Frontier Calculator Instructions

This blog post provides detailed instructions for using the Efficient Frontier Calculator app, a free tool designed to help students and educators explore core concepts in modern portfolio theory. The app allows users to upload a CSV file of historical returns and visualize the efficient frontier, examine portfolio risk and return, and apply weight constraints. Outputs include charts, tables, and a utility-maximizing portfolio based on a risk-aversion parameter. The app supports multiple date formats and runs on both desktop and mobile browsers. Use this guide to understand the inputs, outputs, and functionality of the calculator in your classroom or coursework.

U.S. Corporate Bond Payment Frequencies

The article analyzes bond payment frequencies for S&P 500 companies to verify if semiannual payments are universally used. Using a dataset of 15,465 bonds, the study finds that 93.5% pay semiannually, justifying textbook assumptions. However, the Finance sector issues most of the exceptions, including monthly and other frequencies. Most sectors only use semiannual payments, supporting the emphasis in academic resources.

Coin Tosses and Stock Price Charts

The article demonstrates randomness in stock price movements using an Excel simulation inspired by A Random Walk Down Wall Street by Burton Malkiel. It starts with a simple model based on coin tosses, where a "head" causes the price to rise and a "tail" causes it to fall, mimicking the unpredictability of markets. The article then uses geometric Brownian motion for more realistic modeling. Excel functions and VBA are employed to generate data and create high-low-close stock charts, showing that many technical patterns can emerge purely from random processes.

Excel’s NPV Function Doesn’t Calculate Net Present Value

The article explains that Excel's NPV function does not truly calculate Net Present Value because it doesn’t include the initial investment. Instead, it calculates the present value of uneven cash flows. To get real NPV, subtract the initial outlay from the NPV result or include it in the cash flow range and adjust the time period. It also introduces a third method using the PV function with arrays to achieve the same result in one step.