MONTHLY Expected Returns, Standard Deviations, and Correlations (1975-2014, 480 months), Portfolios are Top or Bottom Decile in Size or Book-to-Market Ratio Correlation with: Asset Class Gold Expected Return Std. Deviation Large Stocks Small Stocks Value Stocks Growth Stocks Large Stocks 1.01% 4.30% 1.00 0.65 0.75 0.75 0.93 0.69 -0.01 0.07 Small Stocks 1.35% 6.10% 0.65 1.00 0.75 Value Stocks 1.51% 5.94% 0.75 1.00 0.65 0.01 Growth Stocks 0.95% 0.93 0.00 5.13% 5.66% 0.69 0.07 0.65 0.01 1.00 0.00 Gold 0.54% -0.01 1.00 For the questions below, assume a risk-free rate of 0.4% per month. 3. Suppose you CANNOT short: a. What is the expected return and portfolio standard deviation of the tangency portfolio? What are the portfolio weights? b. Does GOLD have any part in this portfolio? If yes, why is GOLD a useful part of the portfolio? If not, why is GOLD not part of it? MONTHLY Expected Returns, Standard Deviations, and Correlations (1975-2014, 480 months), Portfolios are Top or Bottom Decile in Size or Book-to-Market Ratio Correlation with: Asset Class Gold Expected Return Std. Deviation Large Stocks Small Stocks Value Stocks Growth Stocks Large Stocks 1.01% 4.30% 1.00 0.65 0.75 0.75 0.93 0.69 -0.01 0.07 Small Stocks 1.35% 6.10% 0.65 1.00 0.75 Value Stocks 1.51% 5.94% 0.75 1.00 0.65 0.01 Growth Stocks 0.95% 0.93 0.00 5.13% 5.66% 0.69 0.07 0.65 0.01 1.00 0.00 Gold 0.54% -0.01 1.00 For the questions below, assume a risk-free rate of 0.4% per month. 3. Suppose you CANNOT short: a. What is the expected return and portfolio standard deviation of the tangency portfolio? What are the portfolio weights? b. Does GOLD have any part in this portfolio? If yes, why is GOLD a useful part of the portfolio? If not, why is GOLD not part of it