Computation of expected returns and variances and covariance

Assignment Help Finance Basics

Reference no: EM1312275

Computation of expected returns, variances and covariance of stocks

Tangency Portfolio Problem. From finance.yahoo.com collect 10 years of monthly returns for four stocks. Sample of 10 years of monthly data should be a pretty reasonable estimate of expected returns, variances, and covariance.

Compute your complete portfolio. Choose your own risk aversion coefficient A. assume that the T-bill rate is 0.5%¹. You have to report

i. Corresponding weights of the Tangency and T-Bill portfolios;

ii. Expected return and volatility of the complete portfolio.

Hint: using vector formulation, it is very easy to compute portfolio\'s variance! If ω is the N X 1 vector of portfolio weights and Ω is the N X N variance-co variance matrix, then the portfolio variance is σ_p² = ω\'Ωω and portfolio volatility is σ_p = (ω\'Ωω)^1/2.

Reference no: EM1312275

Questions Cloud

Determine the machine''s internal rate of return : Determine the machine's internal rate of return, to the nearest whole percent, if it costs $30,000 and will save $6,000 annually in cash operating costs? Would you recommend purchase?

Social welfare increase as a result of the price ceiling : The local community has instituted a price ceiling of $480. Does consumer surplus increase due to this price ceiling. Does social welfare increase as a result of the price ceiling

Probability based on poisson distribution : Find the probability that in a given month:

Process of meiosis and sexual life cycles : Explain the process of the Meiosis and the Sexual Life Cycles. Eukaryotic cells may divide through the mitosis or meiosis. In humans, mitosis generates new cells for the growth and repair.

Computation of expected returns and variances and covariance : Computation of expected returns and variances and covariance of stocks and Choose your own risk aversion coefficient

Estimate the acceleration of cyclist and roller coaster : What would be the time constant in a RC circuit when R = 200 kohms and C = 10mf? 20

Few stars to fully staff every team : Here are too few stars to fully staff every team, but there are enough for a few to be on every team if an owner decided to hire them.

Compute the project''s net present value : Compute the project's net present value and evaluate the project's internal rate of return to the nearest whole percent.

Probability for student with master-s degree in english : Compute the probability that randomly chosen student with a Master's degree majored in English or mathematics?

User Account

All Pages