Q4. Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of the stocks is 44 percent, and the av...
Q4. Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of the stocks is 44 percent, and the average pairwise correlation among the stocks is 0.30. What is your estimate of the standard deviation of the fund's portfolio?
Homework Answers
| No. of stocks = | 500 | |||
| Weight of each stock = 1/500= | 0.002 | |||
| Standard deviaiton of each stock = | 44% | |||
| correlation between each stock = | 0.3 | |||
| no. of combination of standard portfolio calculation = 500^2 = | 250000 | |||
|
Total no. of combination of (weight * std. dev.)^2 = 500 |
||||
| Total no. of other combination = 250000-500= | 249500 | |||
|
Standard deviation of portfolio = |
||||
| (σp) |
√(500*(w s* σs )^ 2 )+ (249500 * (wS * σS * WS * σS * correlation)) |
|||
| (σp) = |
√(500*(0.002*44%)^2) + (249500*0.002*0.002*44%*44%*0.30) |
|||
| (σp) = | √(0.05835104) | |||
| (σp) = | 0.2415595993 | or 24.16% | ||
|
So, standard deviation of fund's portfolio is 24.16% |
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Q4. Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of the stocks is 44 percent, and the av...
Q4. Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights...
Q4. Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of the stocks is 44 percent, and the average pairwise correlation among the stocks is 0.30. What is your estimate of the standard deviation of the fund's portfolio?
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A certain mutual fund invests in both U.S. and foreign markets. Let x be a random variable that represents the monthly percentage return for the fund. Assume x has mean u = 1.8% and standard deviation o = 0.6%. (a) The fund has over 500 stocks that combine together to give the overall monthly percentage return x. We can consider the monthly return of the stocks in the fund to be a sample from the population of monthly...
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Year using the returns for the first three years. The next rolling ace would be calculated using the returns from Years 2. 3. and 4, and so on Using the annual returns for large company stocks and Treasury bills, calculate both the 5- and 10-year rolling average return and standard deviation. h Over how many 5-year periods did Treasury bills outreform Caree company stocks?...
Answer all questions and show work using hand formulas only. Do NOT answer the question if...
Answer all questions and show work using hand formulas only. Do
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1.
2.
3.
TABLE 5.3 Risk and return of investments in major asset classes, 1927-2016 T-bills T-bonds Stocks Arithmetic average Risk premium Standard deviation max min 3.42 N/A 3.14 14.71 -0.02 5.51 2.08 8.14 38.07 -8.47 11.91 8.48 19.99 56.38 -43.73 Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index...
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Dropdown options:
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2-equal to/greater or less than
3-self contained/stand-alone
4-variance/standard deviation
5-variance/beta coefficient
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7-is/ is not
8-diversifiable/non-diversifiable
9-random/non random
10-decreasing/increasing
11-2000+/500
12-reduces/increases
13-systematic of market/unsystematic or company-specific
14-diversifiable/non diversifiable
1. Basic concepts - Risk and return Professor Isadore (Izzy) Invest-a-Lot retired two years ago from Exceptional College, a small liberal arts college in North Carolina after teaching corporate finance and investment theory for 35 years. Yesterday, Izzy appear on EC LIVE, a television show produced for the students,...
A certain mutual fund invests in both U.S. and foreign markets. Let x be a random variable that represents the monthly percentage return for the fund. Assume x has mean u = 1.8% and standard deviation o = 0.6%. (a) The fund has over 500 stocks that combine together to give the overall monthly percentage return x. We can consider the monthly return of the stocks in the fund to be a sample from the population of monthly returns of...
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A certain mutual fund invests in both U.S. and foreign markets. Let x be a random variable that represents the monthly percentage return for the fund. Assume x has mean u = 1.8% and standard deviation o = 0.6%. (a) The fund has over 500 stocks that combine together to give the overall monthly percentage return x. We can consider the monthly return of the stocks in the fund to be a sample from the population of monthly...
I need help calculating all kf these questions. Really stuck
on all of them! Thank you!
Year using the returns for the first three years. The next rolling ace would be calculated using the returns from Years 2. 3. and 4, and so on Using the annual returns for large company stocks and Treasury bills, calculate both the 5- and 10-year rolling average return and standard deviation. h Over how many 5-year periods did Treasury bills outreform Caree company stocks?...
Answer all questions and show work using hand formulas only. Do
NOT answer the question if you cannot answer everything.
1.
2.
3.
TABLE 5.3 Risk and return of investments in major asset classes, 1927-2016 T-bills T-bonds Stocks Arithmetic average Risk premium Standard deviation max min 3.42 N/A 3.14 14.71 -0.02 5.51 2.08 8.14 38.07 -8.47 11.91 8.48 19.99 56.38 -43.73 Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index...
Dropdown options:
1-risk/return
2-equal to/greater or less than
3-self contained/stand-alone
4-variance/standard deviation
5-variance/beta coefficient
6-diversifiable/non-diversiable
7-is/ is not
8-diversifiable/non-diversifiable
9-random/non random
10-decreasing/increasing
11-2000+/500
12-reduces/increases
13-systematic of market/unsystematic or company-specific
14-diversifiable/non diversifiable
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