Assume you hold an equally weighted portfolio of N 100 stocks (i e ) Variances 1 0 01of individual stock are the same and equal to 2 16 Assume all stocks are divided into two groups group A stocks are from 1 50 and group B are from 51 100 Any pair of stocks from group A have pairwise covariances of...

Variance of Portfolio withn stocks Co i1 j1 E wCova a 2 wwCov ...

Assume you hold an equally-weighted portfolio of N=100 stocks. (i.e. ). Variances ????????=1????=0.01of individual stock are the

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Assume you hold an equally-weighted portfolio of N=100 stocks. (i.e. ). Variances ????????=1????=0.01of individual stock are the same and equal to σ2=16. Assume all stocks are divided into two groups: group A stocks are from 1-50 and group B are from 51-100. Any pair of stocks from group A have pairwise covariances of 4. Any pair of stocks from group B have covariance of 4. Stocks from different groups have covariance 2 with each other.

A) Find contribution to total variance of your equally-weighted portfolio from stock variances

B) Find contribution total variance of your equally-weighted portfolio from stock covariances and calculate total variance of your portfolio.

Posted Date: Oct 15, 2021 11:51 PM

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Assume you hold an equally-weighted portfolio of N=100 stocks. (i.e. ). Variances ????????=1????=0.01of individual stock are the

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