Part 2. Go to Yahoo! finance site. Please download monthly adj. close prices from 12/1/2012 to 12/1/2017 for S\&P 500 index (SP500TR) and the following funds: - European stock fund: Fidelity Europe (FIEUX) - Latin America Fund: Fidelity Latin America (FLATX) - Small Cap Stock Fund: Fidelity Small Cap Stock (FSLCX) 1. Compute univariate descriptive statistics (mean, variance, standard deviation, skewness, kurtosis) for each return series and comment. (2p) a. Which funds have the highest and lowest average return? (1p) b. Which funds have the highest and lowest standard deviation? (1p) c. Which funds look most and least normally distributed? (1p) 2. Using a monthly risk free rate equal to 0.04167% per month (which corresponds to a continuously compounded annual rate of 0.5\%), compute Sharpe's slope/ratio for each fund. Arrange these values in a table from highest to lowest. Which asset has the highest Sharpe ratios? (5p) 3. Compute and plot all pair-wise scatterplots between these 3 funds. Briefly comment on any relationships you see. (5p) 4. Compute the sample covariance matrix of the returns on these 3 funds and comment on the direction of linear association between the asset returns. (5p) 5. Compute the sample correlation matrix of the returns on these 3 funds. (2p) a. Which funds are most highly correlated? (1p) b. Which are least correlated? (1p) c. Based on the estimated correlation values do you think diversification will reduce risk with these assets? (1p) Part 2. Go to Yahoo! finance site. Please download monthly adj. close prices from 12/1/2012 to 12/1/2017 for S\&P 500 index (SP500TR) and the following funds: - European stock fund: Fidelity Europe (FIEUX) - Latin America Fund: Fidelity Latin America (FLATX) - Small Cap Stock Fund: Fidelity Small Cap Stock (FSLCX) 1. Compute univariate descriptive statistics (mean, variance, standard deviation, skewness, kurtosis) for each return series and comment. (2p) a. Which funds have the highest and lowest average return? (1p) b. Which funds have the highest and lowest standard deviation? (1p) c. Which funds look most and least normally distributed? (1p) 2. Using a monthly risk free rate equal to 0.04167% per month (which corresponds to a continuously compounded annual rate of 0.5\%), compute Sharpe's slope/ratio for each fund. Arrange these values in a table from highest to lowest. Which asset has the highest Sharpe ratios? (5p) 3. Compute and plot all pair-wise scatterplots between these 3 funds. Briefly comment on any relationships you see. (5p) 4. Compute the sample covariance matrix of the returns on these 3 funds and comment on the direction of linear association between the asset returns. (5p) 5. Compute the sample correlation matrix of the returns on these 3 funds. (2p) a. Which funds are most highly correlated? (1p) b. Which are least correlated? (1p) c. Based on the estimated correlation values do you think diversification will reduce risk with these assets? (1p)
