the variance of asset returns is measured in the following units:
The variance of returns for a risky asset is 25%. The variance of the error term, Var(e), is 8%. What portion of the total risk of the asset, as measured by variance, is systematic? Hint: (total risk)^2 = (systematic risk)^2 + (specific risk)^2 --> σ^2 = (Bσm)^2 + (σe)^2
The correlation between two sets of assets is -0.1. Asset A has a variance of returns of 25 percent squared and Asset B has a variance of returns of 144 percent squared. What is the covariance between Asset A and B’s returns in terms of percent squared? a -600 B. -360 C. -0.0017 D. -6.0
13.57% Question 18 1 pts Given their expected returns, the variance of a two-asset portfolio will be the lowest if the correlation coefficient between two of the stocks is 0. True False
An asset has an average historical rate of return of 13.2 percent and a variance of .00972196. What range of returns would you expect to see approximately two/thirds of the time? An asset has an average historical rate of return of 13.2 percent and a variance of.00972196. What range of returns would you expect to see approximately two-thirds of the time? (Bubble your answer below) 2ク An asset has an average historical rate of return of 13.2 percent and a...
The standard deviation of Asset A returns is 36%, while the standard deviation of Asset M returns in 24%. The correlation between Asset A and Asset M returns is 0.4. (a) The average of Asset A and Asset M’s standard deviations is (36+24)/2 = 30%. Consider a portfolio, P, with 50% of funds in Asset A and 50% of funds in Asset M. Will the standard deviation of portfolio P’s returns be greater than, equal to, or less than 30%?...
7. The market risk, beta, of a security is equal to the variance of the security's returns divided by the covariance between the security and market returns. the variance of the security's returns divided by the variance of the market's returns. the covariance between the security and market returns divided by the standard deviation of the market's returns. the covariance between the security's return and the market return divided by the variance of the market's returns.
Let x1,..., Tn be a variable measured for units in a sample with sample variance given by s - a-2)2 T where r r, is the mean of the sample. Let u denote the mean of the population from which 2-1 the sample came. Let yi -xi - 7, for i -1,...,n. How do the values of sz and sy compare to s2 and sz? Prove your result. (More on this in the Computational section of the homework.) Let zi...
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...
The market risk premium is 8%. The market variance is 20%. The variance of asset XYZ is 40%. The covariance between asset XYZ and the market is 10%. According to the CAPM, what should the risk premium of asset XYZ be?
Consider a portfolio consisting of the following two risky assets. Asset i Hi, Return on Asset i 7% 7% 0, Risk in Asset i 18% 14% The coefficient of correlation between the returns is p = -100%. (a) State the expected return and associated risk (as measured by the standard deviation) in terms of w if w is the weight allocation of Asset 1 in the portfolio. Hry (w) = 0.07 Or, (w) = sqrt(0.0632w^2-0.C (b) Suppose that the portfolio...