A) Report the overall realized return on your investment portfolio.
Realized return of portfolio=w1*R1+w2*R2+w3*R3+w4*R4
wi=weight of stock i in your portfolio
Ri=realized return of asset i= (Price @ end Price @ beginning)/Price @ beginning
OR
more formally:
R=(P[t+1]-P[t])/P[t]
B) Report the variance-covariance matrix
Take estimates from the other web pages
You can take estimates of volatilities of individual stocks from Reuters, Bloomberg, Yahoo finance or other sources. If you are not quite sure how to estimate covariances between stocks:
You can take estimates of Reuters, Bloomberg or other credible web page.
C) Compute the volatility of your portfolio
Hint: it is easy to compute in matrix form in excel. MMULT command.
Sigma2_p= w_T* Variance-covariance matrix*w
D) Compute Sharpe ratio, assuming risk-free rate of 2%. Interpret Sharpe ratio
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
