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Unformatted text preview: R f = 0 . 001: a. Find the cuto point C * when short sales are allowed and when short sales are not allowed. b. Assume short sales are not allowed: Find the composition of the optimum portfolio. c. Assume short sales are allowed: Find the composition of the optimum portfolio. Note: You should submit the table that shows all the necessary steps. Exercise 3: Constant correlation model: Use these data (10 stocks) and R f = 0 . 001: a. Find the cuto point C * when short sales are allowed and when short sales are not allowed. You will have to compute the average correlation coecient rst by using all the ( 10 2 ) = 45 pairs. So nd the correlation matrix rst. b. Assume no short sales are allowed: Find the composition of the optimum portfolio. c. Assume short sales are allowed: Find the composition of the optimum portfolio. Note: You should submit the table that shows all the necessary steps....
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 Spring '11
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