The following are monthly percentage price changes for four market indices. S&P Russell Month DJIA 500 2000
Question:
The following are monthly percentage price changes for four market indices.
S&P Russell Month DJIA 500 2000 Nikkei 1 0.03 0.02 0.04 0.04 2 0.07 0.06 0.10 0.02 3 0.02 0.01 0.04 0.07 4 0.01 0.03 0.03 0.02 5 0.05 0.04 0.11 0.02 6 0.06 0.04 0.08 0.06 Compute the following.
a. Average monthly rate of return for each index
b. Standard deviation for each index
c. Covariance between the rates of return for the following indices:
DJIA–S&P 500 S&P 500–Russell 2000 S&P 500–Nikkei Russell 2000–Nikkei
d. The correlation coefficients for the same four combinations.
e. Using the answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Discuss the two portfolios.
Step by Step Answer:
Investment Analysis And Portfolio Management
ISBN: 9780176500696
1st Canadian Edition
Authors: Frank K. Reilly, Peggy L. Hedges, Philip Chang, Keith C. Brown, Hedges Reilly Brown