4. Suppose one has a sample of monthly log returns on two stocks with sample means...
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4. Suppose one has a sample of monthly log returns on two stocks with sample means of 0.0032 and 0.0074, sample variances of 0.017 and 0.025, and a sample covariance of 0.0059. A resampled (re-estimated) sample means are 0.0047 and 0.0065, sample variances are 0.0125 and 0.023, and a sample covariance is 0.0058. Answer the following questions with solving process. (25) (a) Using the resample, estimate the efficient portfolio of these two stocks that has an expected return of 0.005; that is, give the two portfolio weights. (b) What is the estimated variance of the return of the portfolio in part (a) using the resample variances and covariances? (c) What are the actual expected return and variance of return for the portfolio in (a) when calculated with the true population values (e.g., with using the original sample means, variances, and covariance)? 4. Suppose one has a sample of monthly log returns on two stocks with sample means of 0.0032 and 0.0074, sample variances of 0.017 and 0.025, and a sample covariance of 0.0059. A resampled (re-estimated) sample means are 0.0047 and 0.0065, sample variances are 0.0125 and 0.023, and a sample covariance is 0.0058. Answer the following questions with solving process. (25) (a) Using the resample, estimate the efficient portfolio of these two stocks that has an expected return of 0.005; that is, give the two portfolio weights. (b) What is the estimated variance of the return of the portfolio in part (a) using the resample variances and covariances? (c) What are the actual expected return and variance of return for the portfolio in (a) when calculated with the true population values (e.g., with using the original sample means, variances, and covariance)?
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To solve this problem well use the resampled estimates provided a To estimate the efficient portfolio with an expected return of 0005 we need to find the portfolio weights that minimize the portfolio ... View the full answer
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-1305262997
11th Edition
Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds
Posted Date:
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