We observe the market capitalization of 5 stocks:

a. Suppose we want to form an equal-weighted portfolio using the above 5 stocks on 15/02/2021, what is the portfolio weight on Stock A?

b. Suppose we want to form a value-weighted portfolio using the above 5 stocks on 31/03/2021, what is the portfolio weight on Stock B?

c. Suppose we want to form a size strategy with quintile portfolios (1 stock per group) using the above 5 stocks on 30/04/2021, which stock should be included in the long-short portfolio?

Which stock should we long?
Which stock should we short?

d. Using the portfolio formed in part (c), compute the one-month holding period return for the size strategy.
 

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Table 1: Market capitalization (in millions) Date Stock A 26/02/2021 552 31/03/2021 577 30/04/2021 580 31/05/2021 496 Stock B 310 305 320 325 Stock C Stock D | Stock E 213 1,236 468 242 1.338 499 238 1.318 473 211 1,567 501 T Table 1: Market capitalization (in millions) Date Stock A 26/02/2021 552 31/03/2021 577 30/04/2021 580 31/05/2021 496 Stock B 310 305 320 325 Stock C Stock D | Stock E 213 1,236 468 242 1.338 499 238 1.318 473 211 1,567 501 T

Answer rating: 100% (QA)

a To form an equalweighted portfolio we need to assign the same weight to each stock Since there are 5 stocks in total the weight of each stock would ... View the full answer