Question
Can You Solve Question 2. Thank you. Today is April 30, 2012, and you have just started your new job with a financial planning firm.
Can You Solve Question 2. Thank you.
Today is April 30, 2012, and you have just started your new job with a financial planning firm. In addition to studying for all your license exams, you have been asked to review a portion of a clients stock portfolio to determine the risk/return profiles of 12 stocks in the portfolio. Unfortunately, your small firm cannot afford the expensive databases that would provide all this information with a few simple keystrokes, but thats why they hired you. Specifically, you have been asked to determine the monthly average returns and standard deviations for the 12 stocks for the past 5 years.
The stocks (with their symbols in parentheses) are :
Date | ADM | BA | CAT | DE | GIS | GOOG | HSY | IBM | JPM | MSFT | PG | WMT | Portfolio(%) |
Average Monthly Return (%) | 0.36% | 0.19% | 1.46% | 1.28% | 0.73% | 0.84% | 0.82% | 1.45% | 0.41% | 0.57% | 0.36% | 0.65% | 0.76% |
Annual Monthly Return (%) | 4.28% | 2.23% | 17.51% | 15.38% | 8.75% | 10.05% | 9.82% | 17.34% | 4.91% | 6.87% | 4.29% | 7.85% | 9.11% |
Standard Deviation (%) | 9.41% | 9.17% | 12.44% | 10.73% | 4.14% | 10.28% | 5.76% | 5.65% | 10.60% | 8.12% | 5.02% | 4.62% | 4.99% |
Annual Standard Deviation (%%) | 32.60% | 31.78% | 43.08% | 37.18% | 14.35% | 35.60% | 19.96% | 19.59% | 36.72% | 28.14% | 17.41% | 16.02% | 17.28% |
Question 2
Repeat steps from question 1 and calculate semi-standard deviation for stocks and portfolio.
1. What do you notice about the average of the volatilities of the individual stocks, compared to the volatility of the equally weighted portfolio?
2. Does the result from question 1 is in line with results of question 2? If there is any contradictory results, how do you justify it?
Can you solve Question 2. Thank you!
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