Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
This question explores the effects of estimation error on apparent arbitrage opportunities in a controlled simulation setting. We simulate returns for N = 20 assets over T = 15 years. We will use the first 10 years for estimation and the selection of the hedge portfolio ("in-sample"), and the remaining 5 years as "out-of-sample" performance evaluation period. We will assume throughout that the risk-free rate is zero so there is no need to distinguish returns and excess returns. All assets follow the single index model Rn,t = αn + βnRM,t + εn,t with a normally distributed market return RM.
The parameters to generate returns are as follows:
Perform 100 simulations (data table) for returns on market-neutral zero-investment portfolios and report the mean return and how often you investment loses money over the performance evaluation period (years 11 to 15) assuming that i) you know the true alphas and betas and invest equal amounts in every stock with positive alpha and short equal amounts of every stock with negative alpha
ii) you estimate alphas (but know betas) using the first 10 years of data and invest equal amounts in every stock with positive alphas and short equal amounts of every stock with negative alphas
Compare and explain your findings.
iii) Think of a way to improve the strategy in (ii) and implement it.
Notes
You own a stock that has an expected return of 16.48 percent and a beta of 1.33. the u.s. treasury bill is yielding 3.65 percent and the inflation rate is 2.95 percent. what is the expected rate of return on the market?
According to Joseph Bruer, what effect did catharsis have on the mental functioning of someone with a troubled mind?
Abdul mistakenly believes that his classmates are unusually hostile. In fact, Abdul is the most quarrelsome and aggressive child in the school. According to psychoanalytic theory, Abdul's belief that his classmates are hostile is a
Determine the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith and fair dealing in the banking relationship.
A rock outcrop reveals the rock sequence below. Which of the following is the most plausible interpretation of what happened while the sediments were deposited?
A 45kg figure skater is spinning on the toes of her skates at 0.60rev/s . Her arms are outstretched as far as they will go. In this orientation, the skater can be modeled as a cylindrical torso (40kg , 20 cm average diameter, 160 cm tall) plus two..
How can better understanding our collective cultural heritage and shared humanity across time and geographic place help us to be better stewards of a global future? What role or roles do you believe understanding cultural differences across time and ..
Evaluation of the intended trail will be crucial for determining whether a full program should be implemented across the whole of the organisation.
Would you classify Bill Gates as a charismatic or transformational leader? Why? Consider the followers and employees of Gates. What are some unique characterisitcs of Gate's followers that might identify him as charismatic or transformational?
What is the purpose of including information systems security as part of an organizational security plan? What actions need to be taken to ensure that proper security measures are included in the design of the security plan as it applies to inform..
The "yellow stone" of Yellowstone national park is sulfur-and iron oxide-stained consolidated volcanic ahs(tuff).
Provide a detailed description of how you would use this method in your study, and include a brief discussion of how you would handle the problem of error- variance.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd