Question
Consider the data contained in the table below, which lists 30 monthly excess returns to two different actively managed stock portfolios (A and B) and
Consider the data contained in the table below, which lists 30 monthly excess returns to two different actively managed stock portfolios (A and B) and three different common risk factors (1, 2, and 3). (Note: You may find it useful to use a computer spreadsheet program such as Microsoft Excel to calculate your answers.)
| Period | Portfolio A | Portfolio B | Factor 1 | Factor 2 | Factor 3 | ||||||
| 1 | 1.00 | % | 0.00 | % | 0.02 | % | -1.02 | % | -1.67 | % | |
| 2 | 7.60 | 6.72 | 6.87 | 0.25 | -1.20 | ||||||
| 3 | 4.93 | 5.95 | 4.67 | -1.47 | 2.00 | ||||||
| 4 | 1.16 | 0.37 | 0.59 | 0.44 | 0.21 | ||||||
| 5 | -1.96 | -1.54 | -2.96 | -3.53 | 4.28 | ||||||
| 6 | 4.30 | 2.46 | 2.94 | -3.32 | -1.47 | ||||||
| 7 | -0.68 | -2.38 | -2.79 | -4.58 | -1.69 | ||||||
| 8 | -15.51 | -15.50 | -16.03 | -6.02 | 5.63 | ||||||
| 9 | 6.09 | 3.99 | 6.03 | 0.02 | -3.83 | ||||||
| 10 | 7.78 | 6.82 | 7.02 | -3.27 | -2.84 | ||||||
| 11 | 7.81 | 5.59 | 5.91 | 1.39 | -3.70 | ||||||
| 12 | 9.62 | 4.89 | 5.88 | -0.27 | -5.04 | ||||||
| 13 | 5.32 | 2.77 | 3.57 | 1.08 | -6.24 | ||||||
| 14 | -3.21 | -0.61 | -4.05 | -5.49 | 1.66 | ||||||
| 15 | 5.44 | 2.58 | 3.34 | -3.77 | -3.09 | ||||||
| 16 | 2.41 | 7.27 | 4.43 | 2.82 | 2.79 | ||||||
| 17 | -2.89 | 0.08 | -2.33 | 3.38 | 3.14 | ||||||
| 18 | 6.42 | 3.75 | 4.80 | 3.46 | -4.29 | ||||||
| 19 | -3.40 | -0.70 | -3.45 | 2.08 | 0.69 | ||||||
| 20 | -1.27 | -4.03 | -1.45 | -1.14 | -1.32 | ||||||
| 21 | -1.58 | 0.22 | -2.59 | 3.13 | -3.18 | ||||||
| 22 | 6.02 | 5.35 | 5.82 | -6.57 | -3.10 | ||||||
| 23 | 2.05 | 2.20 | 3.29 | 7.62 | -8.11 | ||||||
| 24 | 7.13 | 6.99 | 7.74 | 6.88 | -9.01 | ||||||
| 25 | -4.87 | -2.72 | -4.36 | 4.12 | -0.07 | ||||||
| 26 | 0.99 | -2.04 | 2.45 | 21.52 | -12.13 | ||||||
| 27 | 8.95 | 5.35 | 5.23 | -16.66 | 7.73 | ||||||
| 28 | -4.28 | -3.04 | -6.25 | -7.50 | 8.68 | ||||||
| 29 | -3.43 | -0.72 | -4.20 | -5.95 | 5.45 | ||||||
| 30 | 3.93 | 1.85 | 4.65 | 13.37 | -8.78 | ||||||
- Compute the average monthly return and monthly standard return deviation for each portfolio and all three risk factors. Also state these values on an annualized basis. (Hint: Monthly returns can be annualized by multiplying them by 12, while monthly standard deviations can be annualized by multiplying them by the square root of 12.) Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to three decimal places.
Portfolio A Portfolio B Factor 1 Factor 2 Factor 3 Monthly: Average % % % % % Std Dev % % % % % Annual: Average % % % % % Std Dev % % % % % -
Calculate the correlation coefficients between each pair of the common risk factors (i.e., 1 & 2, 1 & 3, and 2 & 3). Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to four decimal places.
Correlation between 1 & 2:
Correlation between 1 & 3:
Correlation between 2 & 3:
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The Complete FinOps Handbook Essential Tools And Techniques For Financial Operations
Authors: Peter Bates
1st Edition
1922435546, 978-1922435545
