HW2 - period 2001:01-2009:12. The average monthly return...

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Krannert School of Management MGMT 411: INVESTMENTS Assignment #2 Due September 8, in class No late assignments will be accepted. 1. The following questions are based on the article “Diversification: A Bigger Free Lunch” by John Campbell. You can find the article on our course site. a) A well-known rule of thumb is that a 20-stock portfolio is adequately diversified. According to the article, is this rule of thumb still valid? If not, then what would be the new rule of thumb? b) What has been happening in the market to cause the adjustment to the old rule of thumb? Explain in detail. 2. The following two graphs plot the histograms of monthly and daily returns for Nokia for the
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Unformatted text preview: period 2001:01-2009:12. The average monthly return for Nokia in this period is -0.00089. The skewness of the return is -0.0235, and the kurtosis is 1.0446. The average daily return for Nokia in this period is 0. The skewness of the return is -0.2243, and the kurtosis is 5.6092. a) Does the monthly return of Nokia come from a normal distribution? Explain your answer in detail in order to receive full credit. b) Does the daily return of Nokia come from a normal distribution? Explain your answer in detail in order to receive full credit....
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