Spreadsheet-6-6-Diversification-IWM-SPY

Spreadsheet-6-6-Diversification-IWM-SPY - Input Data IWM...

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Unformatted text preview: Input Data IWM SPY Spreadsheet 6.6 IWM SPY σ σ Investment opportunity set 17.26 11.43 37.26 20.67 for stocks and bonds with various correlation coefficients Weight in stocks Portfolio expected return-1 0.87 0.5 1-0.1 10.8 26.46 23.04 19.58 21.12 19.01 0.0 11.4 20.67 20.67 20.67 20.67 20.67 0.1 12.0 14.88 18.97 21.92 20.72 22.33 0.2 12.6 9.08 18.14 23.31 21.26 23.99 0.3 13.2 3.29 18.28 24.81 22.27 25.65 0.4 13.8 2.50 19.39 26.41 23.68 27.31 0.6 14.9 14.09 23.84 29.83 27.44 30.62 0.8 16.1 25.67 30.09 33.47 32.08 33.94 1.0 17.3 37.26 37.26 37.26 37.26 37.26 1.1 17.8 43.05 41.04 39.20 39.99 38.92 0.3568 0.2353-0.5106 0.0403-1.2459 13.51 12.80 8.45 11.67 4.17 0.00 18.08 17.41 20.63 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 3....
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