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US UK France Germany Japan Means: 0.1355 0.1589 0.1519 0.1435 0.1497 s.d.: 0.1535 0.2430 0.2324 0.2038 0.2298 Correlation matrix: US UK France Germany Japan US

US UK France Germany Japan

Means: 0.1355 0.1589 0.1519 0.1435 0.1497

s.d.: 0.1535 0.2430 0.2324 0.2038 0.2298

Correlation matrix:

US UK France Germany Japan

US 1.0000 0.5003 0.4398 0.3681 0.2663

UK 0.5003 1.0000 0.5420 0.4265 0.3581

FR 0.4398 0.5420 1.0000 0.6032 0.3923

GR 0.3681 0.4265 0.6032 1.0000 0.3663

JP 0.2663 0.3581 0.3923 0.3663 1.0000

  1. If risk-free rate is 7%, and the only risky asset available is Germany stock, what could be the optimal weight on Germany stock for an investor with a risk aversion of 4?

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