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. Suppose that all stocks can be grouped into two mutually exclusive portfolios ( with each stock appearing in only one portfolio ) : G
Suppose that all stocks can be grouped into two mutually exclusive portfolios with each stock appearing in only one portfolio: GStocks and VStocks. Assume that these two portfolios are equal in size market value the correlation of their returns is equal to and the portfolios have the following characteristics: Expected return Volatility VStocks GStocks The riskfree rate is Then the expected return for the market portfolio which is a combination of VStocks and GStocks is and using this expected return on the market portfolio and the riskfree interest rate, the Sharpe ratio is
Suppose that all stocks can be grouped into two mutually exclusive portfolios with each stock appearing in only one portfolio: GStocks and VStocks. Assume that these two portfolios are equal in size market value the correlation of their returns is equal to and the portfolios have the following characteristics:
Expected return Volatility
VStocks
GStocks
The riskfree rate is Then the expected return for the market portfolio which is a combination of VStocks and GStocks is and using this expected return on the market portfolio and the riskfree interest rate, the Sharpe ratio is
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