FRS, an investment advisory firm, relies on mean-variance analysis to advise its clients. One of FRS's...
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FRS, an investment advisory firm, relies on mean-variance analysis to advise its clients. One of FRS's clients requests an analysis of two risky mutual funds (Fund W and Fund X). FRS calculates the average variance of returns across all assets within each mutual fund, the average covariance of returns across all pairs of assets within each mutual fund, and each mutual fund's total variance of returns. The results of FRS's calculation are reported as follows: Average Asset Variance Average Covariance Fund Total Variance Fund W 0.60 0.24 0.25 Fund X 0.60 0.24 0.36 Which mutual fund is most likely to include the largest number of assets? (Explain why) FRS, an investment advisory firm, relies on mean-variance analysis to advise its clients. One of FRS's clients requests an analysis of two risky mutual funds (Fund W and Fund X). FRS calculates the average variance of returns across all assets within each mutual fund, the average covariance of returns across all pairs of assets within each mutual fund, and each mutual fund's total variance of returns. The results of FRS's calculation are reported as follows: Average Asset Variance Average Covariance Fund Total Variance Fund W 0.60 0.24 0.25 Fund X 0.60 0.24 0.36 Which mutual fund is most likely to include the largest number of assets? (Explain why)
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Fund W is likely to have larger number of assets because although both the funds ... View the full answer
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