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 (s_i²) for assets 3 and 4

C. The sample standard deviations of return (s_i) for assets 3 and 4

D. The sample covariance of return (s_ij) between assets 3 and 4

E. The sample correlation coefficient of return (r_ij) 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.