Unformatted text preview: R f = 0 . 001: a. Find the cutoﬀ 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 cutoﬀ point C * when short sales are allowed and when short sales are not allowed. You will have to compute the average correlation coeﬃcient ﬁrst by using all the ( 10 2 ) = 45 pairs. So ﬁnd the correlation matrix ﬁrst. 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....
View
Full Document
 Spring '11
 Nicolas
 Statistics, Probability theory, Department of Statistics, short sales, Nicolas Christou

Click to edit the document details