Consider a portfolio of two stocks whose statistical parameters are given below. Stock A: Annual mean return

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Consider a portfolio of two stocks whose statistical parameters are given below.

 Stock A: Annual mean return = 15%, annual standard deviation of return = 30%.

 Stock B: μ = 8%, σ= 15%.

 Correlation(A,B) = ρ = 0.3


An investor with a buy-and-hold strategy buys a portfolio composed of 60% A and 40% B and holds it for 20 years. Simulate the annual returns on the portfolio. A suggested template is given below.

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Financial Modeling

ISBN: 9780262027281

4th Edition

Authors: Simon Benninga

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