Reference no: EM13829047
Consider the following ex ante (expected) distributions for assets 1 and 2: marginal distributions
|
Asset 1
|
|
|
Asset 2
|
|
|
|
m
|
R1m
|
f(R1m)
|
l
|
R2l
|
f(R2l)
|
|
1
|
12%
|
0.45
|
1
|
4%
|
0.09
|
|
2
|
6%
|
0.55
|
2
|
8%
|
0.17
|
|
|
|
|
3
|
10%
|
0.35
|
|
|
|
|
4
|
14%
|
0.39
|
joint distribution (for above outcomes of return)
|
m
|
L
|
f(R1m, R2l)
|
|
1
|
1
|
0.01
|
|
1
|
2
|
0.03
|
|
1
|
3
|
0.17
|
|
1
|
4
|
0.24
|
|
2
|
1
|
0.08
|
|
2
|
2
|
0.14
|
|
2
|
3
|
0.18
|
|
2
|
4
|
0.15
|
Question
For question 2, consider the following ex post (historical) time series for assets 3 and 4:
|
t
|
R3t
|
R4t
|
|
1
|
-2%
|
3%
|
|
2
|
4%
|
-4%
|
|
3
|
6%
|
20%
|
Question
Using the ex post data given above, calculate the following:
A. The sample mean returns for assets 3 and 4
B. The sample variances (total risk) of return (si2) for assets 3 and 4
C. The sample standard deviations of return (si) for assets 3 and 4
D. The sample covariance of return (sij) between assets 3 and 4
E. The sample correlation coefficient of return (rij) between assets 3 and 4
Additional Information
The question based on the Statistics and it is about finding expected mean, covariance, standard deviation and correlation coefficient between two assets and their returns.