User Account

All Pages

#titleAssignment Help.., Financial Econometrics

Assignment Help:
Question I: (50 points)
Derive the pricing formula for the expected excess return of a risky stock and the riskfree stock in the traditional consumption-CAPM assuming that the level of habit Ht depends on the time t-1 agent’s and the society consumption levels (Ct?1 and Ct?1), that is:
H =C?1 C?2
t t?1 t?1
were ?1 and ?2 are elasticities of Ht with respect to Ct?1 and Ct?1 (constant parameters).

---

In a market where the CAPM holds there are five risky assets with the following attributes per year.
Asset 12345 Expected return 5% 3% ?1% 6% 0% Market capitalisation (in millions of $) 2.2 3 4.6 1.2 5
0B1 2 0.5 0.6 0.81C
B 2 40 8.8 ?13.8 ?2.6 C ?=B 0.5 8.8 17.94 ?0.75 ?2.51 C @ 0.6 ?13. 8 ?0.75 17. 153 0.035 A
0.8 ?2. 6 ?2. 51 0.035 5. 74
1- Calculate the expected return on the market portfolio and the market risk assuming that the portfolio weights are equal.
2- Calculate the expected return on the market portfolio and the market risk assuming that the portfolio weights are proportional to the asset’s market capitalisation.
3- Calculate the expected return on the market portfolio and the market risk using mean-variance model.
4- Which of the three strategies is the best.
5- Do 1, 3 and 4 assuming that the risk-free rate is r = 1% with a weight wf = 0.2.

Related Discussions:- #titleAssignment Help..

Evaluate the feasibility of project, Question 1 : Assuming that you ar...

Question 1 : Assuming that you are appointed as a consultant to assess the Tertiary education sector in Mauritius in order to do a due diligence on the potential f

Aggressive working capital policy, All the non-current assets and part of p...

All the non-current assets and part of permanent assets financed by long term. Remaining permanent assets all temporary fluctuating assets by short term. £65m long term debt and eq

What is propulsion division, In May 2003, Gencorp acquired Sequa Corp.'s pr...

In May 2003, Gencorp acquired Sequa Corp.'s propulsion subsidiary ARC for $133million in cash and $11 million in transactions costs. Table below lists selected information about

Find out the beta of stock, Question Your portfolio has a beta of 1.18...

Question Your portfolio has a beta of 1.18. The portfolio consists of 15% U.S. Treasury bills, 30% in stock A, and 55% in stock B. Stock A has a risk-level equivalent to that o

Financial markets and institutions , I have a case study to do for my fina...

I have a case study to do for my financial markets and institutions subject. I''ve been struggling with one of the questions. So I need help if possible, the question is "What do y

Fin2000.., need help

need help

What is the impact of diversification, What is the relationship between the...

What is the relationship between the arithmetic average and the geometric average return for each stock and the S&P 500? Explain. Compare the standard deviations for each of the

International finance assignment, The table below shows the summary of Bala...

The table below shows the summary of Balance of Payments in New Zealand. Note: Net values are given as credits + debits with correct signs in the balance of payment table.

Acceptance testing, Acceptance Testing is a functional trial done on a prod...

Acceptance Testing is a functional trial done on a product previous to put on the market or distributed to the purchaser. The acceptance testing procedure is intended to replicate

Chapter , a debit is used to record

a debit is used to record

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd