Question
Stocks Mean Return Variance of Return X 2 2.25 Y 4 36 Z 6 4 Stocks Mean Return Variance of Return X 2 2.25 Y
Stocks | Mean Return | Variance of Return |
X | 2 | 2.25 |
Y | 4 | 36 |
Z | 6 | 4 |
Stocks | Mean Return | Variance of Return |
X | 2 | 2.25 |
Y | 4 | 36 |
Z | 6 | 4 |
Correlations | ||
X and Y | X and Z | Z and Y |
0.5 | 0.2 | 0.9 |
Covariance with the market | |
X | 0.2 |
Y | 0.5 |
Z | 0.7 |
Market Variance |
0.5 |
Other Betas | HML | SMB |
X | 0.3 | 1 |
Y | 0.4 | 1.2 |
Z | 0.5 | 0.7 |
Risk Premiums | |
RF | 2% |
Market | 7% |
HML | 3% |
SMB | 9% |
Solve the following questions using the data given above. 2-) Portfolio 2 : X (30%) - Y (40%) - Z (30%)
a-) Find the Standard Deviation and the Expected Return of the portfolio
Fill the following variance covariance matrix (just the numbers up to 2 decimal points)
X | Y | Z | |
X | |||
Y | |||
Z |
portfolio | |
stdev | |
mean |
b-) Find the market, HML, and SMB betas of the portfolio.
market | HML | SMB | |
BETA |
c-) What are the required rate of returns of the portfolio based on CAPM and FF3 factor models, respectively.
CAPM | FFF3 | |
return |
|
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