DIA tracks a price-weighted index of 30 large-cap US stocks, i.e. the Dow Jones Index. Compute...
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DIA tracks a price-weighted index of 30 large-cap US stocks, i.e. the Dow Jones Index. Compute returns on all five assets in the 'Returns' tab. (10pts) Elin is constructing a portfolio that allocates 10% to DIA, 60% to ETF A, -10% to ETF B, 60% to ETF C, and -20% to ETF D. Compute the mean, standard deviation, skewness, kurtosis, and Sharpe Ratio of ELIN'S PORTFOLIO and four ETFs (A, B, C, and D). Sharpe Ratio is defined as the ratio of mean to standard deviation (assuming the risk-free rate is zero). (35pts) Use the information in B to compute the return in ELIN'S PORTFOLIO that are three standard deviations BELOW its mean. Define a market crash as a five-standard deviation event. Did a crash occur in ELIN'S PORTFOLIO? Why and why not? (15pts) Regress C on DIA and regress D on C. Report the alphas and betas after taking the statistical significance into consideration. (10pts) Based on the regression results in part D and what you know about DIA, what can you say about the characteristics of ETF C and ETF D. (10pts) Test if the return on ELIN'S PORTFOLIO in Question B is significantly different from zero. (10pts) Suppose DIA is the benchmark that ELIN'S PORTFOLIO attempts to beat. How would you advise her to invest differently, i.e. change the weights on the DIA, A, B, C, and D. Explain your reasons? DIA tracks a price-weighted index of 30 large-cap US stocks, i.e. the Dow Jones Index. Compute returns on all five assets in the 'Returns' tab. (10pts) Elin is constructing a portfolio that allocates 10% to DIA, 60% to ETF A, -10% to ETF B, 60% to ETF C, and -20% to ETF D. Compute the mean, standard deviation, skewness, kurtosis, and Sharpe Ratio of ELIN'S PORTFOLIO and four ETFs (A, B, C, and D). Sharpe Ratio is defined as the ratio of mean to standard deviation (assuming the risk-free rate is zero). (35pts) Use the information in B to compute the return in ELIN'S PORTFOLIO that are three standard deviations BELOW its mean. Define a market crash as a five-standard deviation event. Did a crash occur in ELIN'S PORTFOLIO? Why and why not? (15pts) Regress C on DIA and regress D on C. Report the alphas and betas after taking the statistical significance into consideration. (10pts) Based on the regression results in part D and what you know about DIA, what can you say about the characteristics of ETF C and ETF D. (10pts) Test if the return on ELIN'S PORTFOLIO in Question B is significantly different from zero. (10pts) Suppose DIA is the benchmark that ELIN'S PORTFOLIO attempts to beat. How would you advise her to invest differently, i.e. change the weights on the DIA, A, B, C, and D. Explain your reasons?
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Answer rating: 100% (QA)
Answers 1 Compute returns on all five assets in the Returns tab 10pts The returns for the five assets DIA ETF A ETF B ETF C and ETF D are as follows DIA 202 ETF A 281 ETF B 269 ETF C 180 ETF D 147 2 E... View the full answer
Related Book For
Statistics For Business And Economics
ISBN: 9780538481649
11th Edition
Authors: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams
Posted Date:
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