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Spreadsheet_6_6

Spreadsheet_6_6 - A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16...

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Input Data Spreadsheet 6.6 Investment opportunity set   10 5 19 8 for stocks and bonds with             various correlation coefficients Weight in stocks  Portfolio expected return -1 0 0.2 0.5 1 -0.1 4.5 10.70 9.00 8.62 8.02 6.90 0.0 5.0 8.00 8.00 8.00 8.00 8.00 0.1 5.5 5.30 7.45 7.81 8.31 9.10 0.2 6.0 2.60 7.44 8.07 8.93 10.20 0.3 6.5 0.10 7.99 8.75 9.79 11.30 0.4 7.0 2.80 8.99 9.77 10.83 12.40 0.6 8.0 8.20 11.84 12.44 13.29 14.60 0.8 9.0 13.60 15.28 15.60 16.06 16.80 1.0 10.0 19.00 19.00 19.00 19.00 19.00 1.1 10.5 21.70 20.92 20.75 20.51 20.10 0.2963 0.1506 0.0923 -0.0440 -0.7273 6.48 5.75 5.46 4.78 1.36 0.00 7.37 7.80 7.97 0.00 Notes:  2.  The standard deviation is calculated from equation 6.6 using the weights of the miniumum-variance portfolio: 3.  As the correlation coefficient grows, the minimum variance portfolio requires a smaller position in stocks (even a      negative position for higher correlations), and its performance becomes less attractive. 4.  Notice that with correlation of .5 or higher,  minimum variance is achieved with a short position in stocks.
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