Question
Consider the following table, which gives historical returns on two stocks and the market: Year Stock A return (%) Stock B return (%) 2007 0.15
Consider the following table, which gives historical returns on two stocks and the market:
| Year | Stock A return (%) | Stock B return (%) |
| 2007 | 0.15 | 0.12 |
| 2008 | 0.22 | 0.05 |
| 2009 | 0.28 | -0.06 |
Assume that these returns can be used to estimate expectation, variance and covariance of future returns.
1. What are the expected rates of return on each stock?
2. What are the covariance of stocks A and B?
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Advances In Financial Machine Learning
Authors: Marcos Lopez De Prado
1st Edition
1119482089, 978-1119482086
