Annual Returns of Beta-sorted Portfolios (Low to High) Macro Data year p1 p2 p3 p4 p5 mkt
Fantastic news! We've Found the answer you've been seeking!
Question:
Annual Returns of Beta-sorted Portfolios (Low to High) | Macro Data | ||||||
year | p1 | p2 | p3 | p4 | p5 | mkt | rf |
1964 | 16.87 | 19.84 | 17.56 | 8.73 | 12.4 | 16.08 | 3.54 |
1965 | 8.72 | 6.98 | 15.53 | 24.76 | 49.06 | 14.45 | 3.93 |
1966 | -9.24 | -12.18 | -9.08 | -2.94 | -2.13 | -8.75 | 4.76 |
1967 | 13.44 | 22.07 | 32.01 | 42.65 | 50.98 | 28.7 | 4.21 |
1968 | 15.83 | 9.16 | 13.53 | 12.41 | 24.61 | 14 | 5.21 |
1969 | -12.59 | -3.74 | -6.72 | -18.64 | -22.6 | -10.96 | 6.58 |
1970 | 8.69 | 2.59 | -3.57 | -6.64 | -19.57 | 0.03 | 6.52 |
1971 | 11.67 | 17.23 | 21.89 | 20.28 | 22.93 | 16.17 | 4.39 |
1972 | 21.77 | 15.27 | 15.19 | 12.49 | -1.15 | 16.89 | 3.84 |
1973 | -11.4 | -14.11 | -23.68 | -35.22 | -42.51 | -19.26 | 6.93 |
1974 | -24.56 | -27.26 | -29.75 | -34.83 | -32.85 | -27.75 | 8 |
1975 | 30.42 | 42.42 | 46.81 | 59.11 | 78.05 | 38.24 | 5.8 |
1976 | 29.67 | 19.63 | 30.55 | 31.77 | 32.05 | 26.99 | 5.08 |
1977 | -1.7 | -9.6 | -1.21 | 3.33 | 8.48 | -3.14 | 5.12 |
1978 | 6.13 | 6.03 | 11.14 | 10.2 | 23.8 | 8.21 | 7.18 |
1979 | 23.99 | 17.59 | 22.84 | 26.92 | 32.87 | 23.47 | 10.38 |
1980 | 29.59 | 31.81 | 31.15 | 42.11 | 45.77 | 33.37 | 11.24 |
1981 | 7.95 | -9.57 | -2.75 | -3.26 | -6.4 | -3.42 | 14.71 |
1982 | 31.33 | 38.34 | 18.15 | 2.76 | 9.5 | 21.2 | 10.54 |
1983 | 15.94 | 29.46 | 25.13 | 29.17 | 16.47 | 22.54 | 8.8 |
1984 | 14.38 | 8.23 | 4.81 | -4.28 | -13.92 | 3.8 | 9.85 |
1985 | 37.22 | 37.25 | 27.69 | 25.88 | 24.2 | 32.63 | 7.72 |
1986 | 29.43 | 16.45 | 15.27 | 5.65 | 4.35 | 16.28 | 6.16 |
1987 | 2.45 | 7.6 | 2.78 | 1.92 | -9.56 | 1.6 | 5.47 |
1988 | 18.51 | 16.44 | 16.4 | 22.86 | 12.93 | 17.9 | 6.35 |
1989 | 33.79 | 29.02 | 29.54 | 23.16 | 25.03 | 28.86 | 8.37 |
1990 | -1.52 | -3.32 | -7.64 | -8.45 | -8.21 | -6.14 | 7.81 |
1991 | 21.86 | 29.75 | 39.31 | 42.05 | 55.51 | 34.78 | 5.6 |
1992 | 4.5 | 5.4 | 13.04 | 19.17 | 17.07 | 9.74 | 3.51 |
1993 | 12 | 7.39 | 7.68 | 17.46 | 16.78 | 11.11 | 2.9 |
1994 | -2.29 | 6.91 | -2.4 | -3.52 | 2.05 | -0.2 | 3.9 |
1995 | 35.14 | 40.07 | 33.81 | 39.85 | 38.96 | 36.82 | 5.6 |
1996 | 16.33 | 18.72 | 26.4 | 24.43 | 29.24 | 21.17 | 5.21 |
1997 | 29.27 | 29.95 | 37.92 | 35.05 | 27.5 | 31.22 | 5.26 |
1998 | 18.66 | 30.68 | 22.2 | 23.61 | 27.21 | 24.32 | 4.86 |
1999 | -4.86 | 19.82 | 14.63 | 29.78 | 52.57 | 25.25 | 4.68 |
2000 | 27.77 | 7.85 | -7.56 | -5.25 | -28.04 | -11.71 | 5.89 |
2001 | -7.97 | -6.28 | 3.38 | -8.28 | -24.56 | -11.37 | 3.83 |
2002 | -9.74 | -13.64 | -13.45 | -25.04 | -35.42 | -21.11 | 1.65 |
2003 | 18.07 | 27.65 | 20.78 | 35.2 | 53.73 | 31.77 | 1.02 |
2004 | 10.81 | 15.25 | 15.47 | 12.99 | 5.15 | 11.92 | 1.2 |
2005 | 4.67 | 10.2 | 6.37 | 8.58 | 1.68 | 6.07 | 2.98 |
2006 | 15.55 | 16.73 | 12.38 | 21.95 | 8.31 | 15.4 | 4.8 |
2007 | 3.77 | 6.18 | 6.14 | 8.11 | 7.02 | 5.7 | 4.66 |
2008 | -28.98 | -33.45 | -36.76 | -48.59 | -50.39 | -36.74 | 1.6 |
2009 | 9.85 | 23.26 | 38.25 | 52.5 | 86.94 | 28.36 | 0.1 |
2010 | 11.81 | 13.37 | 20.14 | 27.59 | 33.69 | 17.49 | 0.12 |
2011 | 12.23 | 1.45 | -2.11 | -10.5 | -18.08 | 0.48 | 0.04 |
2012 | 11.69 | 14.9 | 19.53 | 22.92 | 25.03 | 16.33 | 0.06 |
2013 | 27.56 | 40.86 | 33.47 | 37.48 | 44.35 | 35.22 | 0.02 |
2014 | 17.3 | 14.08 | 9.29 | 5.98 | -1.36 | 11.73 | 0.02 |
2015 | 4.53 | 5.16 | -3.66 | -6.4 | -15.4 | 0.1 | 0.02 |
2016 | 7.46 | 13.4 | 14.41 | 18.63 | 27.38 | 13.5 | 0.2 |
2017 | 18.76 | 24.68 | 23.18 | 21.42 | 23.47 | 22.31 | 0.8 |
2018 | -1.17 | -1.6 | -4.43 | -9.16 | -16.94 | -5.12 | 1.81 |
2019 | 27.02 | 29.68 | 30.35 | 37.5 | 31.61 | 30.42 | 2.14 |
https://docs.google.com/spreadsheets/d/18TJYBOjCl6U8cxZQMQi30JU-tNMnUuZMNrPCBtCki3I/edit?usp=sharing
1a) Compute the average return, volatility, average beta, and the Sharpe Ratio of each Portfolio | |||||||
Annual Returns of Beta-sorted Portfolios (Low to High) | Other Portfolios | ||||||
portfolio 1 | portfolio 2 | portfolio 3 | portfolio 4 | portfolio 5 | market port. | risk-free port. | |
Mean | |||||||
Volatility | |||||||
Sharpe | |||||||
Avg. Beta | 0.70 | 0.89 | 0.96 | 1.19 | 1.46 |
1b) As a mean variance investor who needs to pick one of the five beta sorted portfolios, which portfolio would you choose and why?
1c) Show graphically that CAPM does not hold. Plot the security market line (SML) predicted by the data on the market return and the riskless rate along with the average returns and average betas of portfolios
E[r] | |
0 | |
0.05 | |
0.1 | |
0.15 | |
0.2 | |
0.25 | |
0.3 | |
0.35 | |
0.4 | |
0.45 | |
0.5 | |
0.55 | |
0.6 | |
0.65 | |
0.7 | |
0.75 | |
0.8 | |
0.85 | |
0.9 | |
0.95 | |
1 | |
1.05 | |
1.1 | |
1.15 | |
1.2 | |
1.25 | |
1.3 | |
1.35 | |
1.4 | |
1.45 | |
1.5 | |
1.55 | |
1.6 | |
1.65 | |
1.7 | |
1.75 | |
1.8 | |
1.85 | |
1.9 | |
1.95 | |
2 | |
2.05 | |
2.1 | |
2.15 | |
2.2 | |
2.25 | |
2.3 | |
2.35 | |
2.4 | |
2.45 | |
2.5 | |
2.55 | |
2.6 | |
2.65 | |
2.7 | |
2.75 |
1d) What does the relation between the expected portfolio returns and betas imply for mispricing under the assumption that the CAPM is the right model? Which portfolios are overpriced and which portfolios are underpriced?
Related Book For
Operations Management
ISBN: 9781260547610
2nd International Edition
Authors: Gerard Cachon, Christian Terwiesch
Posted Date: