cross sectional std=std & a(j)) = (j) Optimal weight for each market is give by: ....
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cross sectional std=std & a(j)) = (j) Optimal weight for each market is give by: . (j) w(i=a(i)/i (i) in w(i) represents a market and j in the sigma represent time. The weights need to be normalized. That means, when you sum up the weights they do not add up to 1 or 100%. This is how you make sure they add up to 100%. w(i) k=0 wi=will After you determine the weights, you would calculate the return on the portfolio each week using: 8 Rp=wi*ri) i=1 Calculate the cumulative return of the portfolio and plot the time series of the of the portfolio. For comparison, you select a portfolio of equal weight by assigning 1/10 weight to each asset and calculate the weekly return for that portfolio (using the equation above). Plot the cumulative returns fo this portfolio as well. cross sectional std=std & a(j)) = (j) Optimal weight for each market is give by: . (j) w(i=a(i)/i (i) in w(i) represents a market and j in the sigma represent time. The weights need to be normalized. That means, when you sum up the weights they do not add up to 1 or 100%. This is how you make sure they add up to 100%. w(i) k=0 wi=will After you determine the weights, you would calculate the return on the portfolio each week using: 8 Rp=wi*ri) i=1 Calculate the cumulative return of the portfolio and plot the time series of the of the portfolio. For comparison, you select a portfolio of equal weight by assigning 1/10 weight to each asset and calculate the weekly return for that portfolio (using the equation above). Plot the cumulative returns fo this portfolio as well.
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