Suppose The Management's position had been 95% in the Vanguard index during the time period used with the data and 5% in one of the individual stocks. For each of the two such portfolios (95% Vanguard/5% California REIT or 95% Vanguard/5% Brown), calculate the volatility of the portfolio. Which stock contributes more to the volatility of the portfolio? Is it the same as the stock with the higher volatility?

 

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MONTH 1989 January February March April May June July August September October November December 1990 - January February March April May June - July August September October November December Vanguard Index 500 Trust 7.32% -2.47% 2.26% 5.18% 4.04% -0.59% 9.01% 1.86% -0.40% -2.34% 2.04% 2.38% -6.72% 1.27% 2.61% -2.50% 9.69% -0.69% -0.32% -9.03% -4.89% -0.41% 6.44% 2.72% California REIT -28.26% -3.03% 8.75% -1.47% -1.49% -9.09% 10.67% -9.38% 10.34% -14.38% -14.81% -4.35% -5.45% 5.00% 9.52% -0.87% 0.00% 4.55% 3.48% 0.00% -13.04% 0.00% 1.50% -2.56% Brown Group 9.16% 0.73% -0.29% 2.21% -1.08% -0.65% 2.22% 0.00% 1.88% -7.55% -12.84% -1.70% -15.21% 7.61% 1.11% -0.51% 12.71% 3.32% 3.17% -14.72% -1.91% -12.50% 17.26% -8.53% MONTH 1989 January February March April May June July August September October November December 1990 - January February March April May June - July August September October November December Vanguard Index 500 Trust 7.32% -2.47% 2.26% 5.18% 4.04% -0.59% 9.01% 1.86% -0.40% -2.34% 2.04% 2.38% -6.72% 1.27% 2.61% -2.50% 9.69% -0.69% -0.32% -9.03% -4.89% -0.41% 6.44% 2.72% California REIT -28.26% -3.03% 8.75% -1.47% -1.49% -9.09% 10.67% -9.38% 10.34% -14.38% -14.81% -4.35% -5.45% 5.00% 9.52% -0.87% 0.00% 4.55% 3.48% 0.00% -13.04% 0.00% 1.50% -2.56% Brown Group 9.16% 0.73% -0.29% 2.21% -1.08% -0.65% 2.22% 0.00% 1.88% -7.55% -12.84% -1.70% -15.21% 7.61% 1.11% -0.51% 12.71% 3.32% 3.17% -14.72% -1.91% -12.50% 17.26% -8.53%

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