Question
Plot historical prices for the six assets on the same line chart. Computereturnsonalltheassets(Asset_AF) inthe Returnstab. A portfolio allocates 20% to Asset_A, 20% to ETF Asset_B,
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Plot historical prices for the six assets on the same line chart.
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Computereturnsonalltheassets(Asset_AF) inthe Returnstab.
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A portfolio allocates 20% to Asset_A, 20% to ETF Asset_B, 20% to Asset_C, and 40% to Asset_D.
Compute the mean, standard deviation, skewness, kurtosis, and Sharpe Ratio of this portfolio and the four assets (A, B, C, and D). Sharpe Ratio is defined as the ratio of mean to standard deviation (assuming risk free rate is zero).
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A 130/30 trading strategy means shorting an asset up to 30% of the portfolio value and then taking the funds to long positions on other assets. Consider a 130/30 portfolio that is 50% Asset_A, 30% Asset_B, 50% Asset_C, and -30% Asset_D. Compute the mean, standard deviation, skewness,andSharpeRatioofthisportfolio. ComparethisportfoliototheoneinQuestionC., what do you observe?
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Regress Asset_A on Asset_D, Asset_B on Asset_D, and Asset_C on Asset_D and draw the following three scatter plots: Asset_A vs Asset_D, Asset_B vs Asset_D, Asset_C vs Asset_D. Given that Asset_D is an ETF tracking the technology sector, which asset is more likely to be a technologystock? Why?
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What are your observations from Question E? Are the alphas and betas from the regressions in Question E significant? Report the alphas and betas after taking the statistical significance into consideration.
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Test if the portfolio return in Question C is significant? Why?
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Test if the portfolio return in Question C is equal to 1%? (a) write out the null and alternative
hypothesis. (b) Compute the test statistic. (c) Should she reject or fail to reject the null
hypothesis?
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Considering Asset_E and Asset_F. Which asset provides a better hedge to the portfolio in
Question C? Test and explain why.
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Test whether Asset_A and Asset_B are correlated. If I am telling you one is an ETF tracking
bitcoin prices, and the other one is an ETF tracking avocado prices, can you provide a rationale to explain their relationship.
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