The recent weekly trends of two particular stock prices can best be described by the joint probability

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The recent weekly trends of two particular stock prices can best be described by the joint probability distribution shown in the file S04_32.xlsx.
a. What is the probability that the price of stock 1 will not increase in the coming week?
b. What is the probability that the price of stock 2 will change in the coming week?
c. What is the probability that the price of stock 1 will not decrease, given that the price of stock 2 remains constant in the coming week?
d. What is the probability that the price of stock 2 will change, given that the price of stock 1 changes in the coming week?
e. Why is it impossible to find the correlation between the typical weekly movements of these two stock prices from the information given? Nevertheless, does it appear that they are positively or negatively related? Why? What are the implications of this result for choosing an investment portfolio that may or may not include these two particular stocks?

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Data Analysis and Decision Making

ISBN: 978-0538476126

4th edition

Authors: Christian Albright, Wayne Winston, Christopher Zappe

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