Suppose the long-term mean of the correlation data is 42%. In February 2012, the averaged...
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Finance
Suppose the long-term mean of the correlation data is 42%. In February 2012, the averaged correlation of the 3030 Dow correlation matrices was 37%. From the regression function from 1972 to 2012, we find that the average mean reversion is 55%. What is the expected correlation for March 2012?
6.45%
32.88%
39.75%
43.87%
The long-term mean of the correlation data is 35%. In January 2014, the averaged correlation of the 3030 Dow correlation matrices was 27%. From the regression function from 1972 to 2012, the average mean reversion was 77.5%. What is the expected correlation for February 2014?
27.75%
28.80%
33.20%
37.50%
A risk manager uses the past 480 months of correlation data from the Dow Jones Industrial Average (Dow) to find the mean reversion rate to be 0.77. What should be the estimated one-period autocorrelation for this time period?
23%.
26%.
30%.
33%.
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