Percentage price changes for four market indexes

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Reference no: EM13791967

The following are monthly percentage price changes for four market indexes.

Month DJIA S&P 500 Russell 2000 Nikkei

1 0.03 0.02 0.04 0.04

2 0.07 0.06 0.10 -0.02

3 -0.02 -0.01 -0.04 0.07

4 0.01 0.03 0.03 0.02

5 0.05 0.04 0.11 0.02

6 -0.06 -0.04 -0.08 0.06

Compute the following.

a. Average monthly rate of return for each index.

b. Standard deviation for each index

c. Covariance between the rates of return for the following indexes.

DJIA -S&P 500
S&P 500-- Russell 2000
S&P 500- Nikkei
Russell 2000- Nikkei

d. the correalation coefficients for the same four combinations

e. Using the answer from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisiting equal parys of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Discuss the two portfolios.

Reference no: EM13791967

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