A mean variance optimization model generally includes all of the following inputs for each asset class except?
a. Expected beta.
b. Expected return.
c. Expected correlation between each asset class.
d. Expected standard deviation.
Answer: Option a is correct
A mean variance optimization model does not include expected
beta.
The inputs in mean variance optimization model are:
Expected return on the assets
Expected standard deviation of each asset, it is included as a
measure of risk
Expected correlation (matrix) between each asset class.
A mean variance optimization model generally includes all of the following inputs for each asset class...
35. The Capital Asset Pricing Model uses all of the following variables as inputs except: a. Risk free rate of return. b. Expected market return. c. Beta. d. Required return.
b. What are the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with equal investment in all three assets? d. What is the portfolio's variance and standard deviation using the same asset weights in part Please show all steps! Expected return and standard deviation. Use the following information to answer the questions. Return on Asset R in Return on Asset S in State Return on Asset T in State State of...
4. Asset Allocation (20%) Define mean/variance asset allocation optimization Include an objective function and two constraints in your answer (either in words or equations, both is better). An illustration is needed. b) Intuition is the key ingredient to answering this question effectively. If the expected return on stocks is 10% and the expected return on bonds is 5%, propose specific feasible portfolio weights (one set of two reasonable, defensible weights that total to 100%) of the two asset classes and...
No 3. Consider three securities: Asset I with expected return of 14% and standard deviation of return of 6%, Asset 2 with average return of 8% and standard deviation of returns of 3%, and Asset 3 with mean return of 20% and standard deviation of return of 15%. Further, assume that the correlation coefficient between Asset 1 and Asset 2 is 0.5, between Asset 1 and Asset 3 is 0.2, and between Asset 2 and Asset 3 is 0.4. Finally,...
All of the following are valid criticisms of the unconstrained mean-variance optimization except: It often produces unreasonable portfolios It sometimes generates weights that are greater than zero It often requires investment on margin It often requires short-selling which is hard for many investors to implement
1. The universe of available securities includes two risky stock funds, A and B and T-bills. The data for the universe are as follows: Expected Return Standard Deviation 109 20 Tbilis The correlation coefficient between funds A and B is -0.2. a. Find the optimal risky portfolio, P. and its expected return and standard deviation b. Find the slope of the CAL supported by T-bills and portfolio P. c. How much will an investor with 4-5 invest in funds A...
1. The universe of available securities includes two risky stock funds, A and B, and T-blls. The data for the universe are as follows Expected Return Standard Deviation A 10% 20% В 30 60 T-bills The correlation coefficient between funds A and B is -0.2. a. Find the optimal risky portfolio, P, and its expected return and standard deviation. b. Find the slope of the CAL supported by T-bills and portfolio P c. How much will an investor with A...
Suppose there are three assets: A, B, and C. Asset A’s expected return and standard deviation are 1 percent and 1 percent. Asset B has the same expected return and standard deviation as Asset A. However, the correlation coefficient of Assets A and B is −0.25. Asset C’s return is independent of the other two assets. The expected return and standard deviation of Asset C are 0.5 percent and 1 percent. (a) Find a portfolio of the three assets that...
Home assignment 4 Consider following information Probability of the state of economy Rate of return if state occurs StockA StockB boom normal a. b. c. 0.2 0.8 0.4 0.2 0.05 Calculate the expected return of Calculate the variance and standard deviation of each stock. Calculate the covariance between stock A and B returns and the correlation coefficient. Calculate the expected return of the portfolio (Portfolio!) consisting 40% of stock A and 60% of stock B. Calculate the variance and standard...
There are only two risky assets (stocks) A and B in the market. Asset A: Mean = 20% Standard Deviation = 10% Asset B: Mean = 10% Standard Deviation = 5% Returns on Assets have zero correlation. A.Assume that there is no risk-free asset. (i)Plot (sketch) the efficiency frontier (the investment opportunity set). (ii)What is the expected return and the standard deviation of the minimum-variance-portfolio? (iii)An investor would like to construct a portfolio that has a standard deviation of 8%....