For the research project, we used Walmart (WMT), Exxon (XOM), Chevron (CVX), Delta
(DAL), Apple (AAPL), First Solar (FSLR), and Target (TGT). Historical returns were
downloaded from Yahoo Finance back to March 2010 for the analysis. We assumed a risk
free rate of 1% and a market risk premium of 6%. This low risk free rate was assumed as
we have a medium-term investment horizon so we used a rate between the 2-year U.S.
treasury (which is roughly 0.6%) and the 5-year U.S. treasury (which is roughly 1.4%).
Betas for individual stocks were downloaded from Yahoo Finance in order to calculate
expected returns of each security and the solver feature was used to plot out the efficient
frontier. Exhibit I, II, and III in the appendix provide screenshots of our findings.
The three stocks chosen to have low volatility were Walmart (WMT), Exxon (XOM), and
Chevron (CVX). All three are large cap stocks which have well established businesses and
have been around for 50+ years. All three have strong revenues and have well established
reserves in the form of stockholders equity in case something was to happen to their
primary form of business.
Walmart was chosen as a low volatility stock since it sells a variety of products which are
necessities for consumers in the United States. Risk for the company is quite low since
