Question: Compute the monthly average and the monthly standard deviation for MOM and RF MOM monthly average: 0.75, MOM monthly standard deviation: 4.38 RF monthly average:

Compute the monthly average and the monthly standard deviation for MOM and RF

MOM monthly average: 0.75, MOM monthly standard deviation: 4.38
RF monthly average: 0.4576, RF monthly standard deviation: 0.2299

Based on these sample estimates, build the 95% confidence interval for the return to the MOM portfolio in the next year. Provide a concise explanation of what this interval means in economic terms.

Repeat (ii) for the average annual return. Explain the difference.

Assume that MOM and RF are uncorrelated. Compute the mean and standard deviation of the daily return to strategy S, which is 70% MOM and 30% RF. Assume 22 trading days in a month.

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