What is standard deviation of such a portfolio? Assume that there are only two stocks in the
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Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%. The market portfolio, i.e., the portfolio with the highest Sharpe ratio, is given below: A 1 2 Expected return 3 Variance 4 Standard deviation 5 Covariance 6 7 Market portfolio 8 Weights 9 Expected return 10 Variance 11 Standard deviation 12 Sharpe ratio B Stock A C Stock B Risk-free asset 0.062 0.0961 0.0484 0.31 0.22 0.02046 0.1613 0.0712 0.04208 0.2051 0.201 0.073 0.03 0.839 1-B8 D =B8*B2+C8 C2 =B8^2*B3+C8^2*C3+2*B8*C8*B5 =B10^0.5 =(B9-D2)/B11 Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%. The market portfolio, i.e., the portfolio with the highest Sharpe ratio, is given below: A 1 2 Expected return 3 Variance 4 Standard deviation 5 Covariance 6 7 Market portfolio 8 Weights 9 Expected return 10 Variance 11 Standard deviation 12 Sharpe ratio B Stock A C Stock B Risk-free asset 0.062 0.0961 0.0484 0.31 0.22 0.02046 0.1613 0.0712 0.04208 0.2051 0.201 0.073 0.03 0.839 1-B8 D =B8*B2+C8 C2 =B8^2*B3+C8^2*C3+2*B8*C8*B5 =B10^0.5 =(B9-D2)/B11
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To calculate the standard deviation of the portfolio we need to consider the weights of ... View the full answer
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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