Question
You hold an equally weighted portfolio of 4 shares, lets us call them A, B, C and D. (a) Suppose the portfolio value is $1
You hold an equally weighted portfolio of 4 shares, lets us call them A, B, C and D. (a) Suppose the portfolio value is $1 million and the share prices are $250 for A, $500 for B, $1000 for C, and $2,000 for D. How many do you hold of each share? (b) After one month you have ordinary (not log) returns of 10% on A, 5% on B, 6% on C, and 4% on D. What is the new value of your portfolio? (c) Given these returns, how many of each share should you buy or sell to rebalance to an approximately equally-weighted portfolio again? Note: Your rebalanced portfolio will only be approximately equally weighted because fractional share amounts cannot be bought or sold, so you must round your answers to the nearest integer.
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