fm3_problems08

# 3 024 portfolio expected return portfolio standard

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Unformatted text preview: ### Sigma for Correlation(A,B) Expected 1 0 -1 return 6.71% 6.71% 6.71% 5.00% 6.54% 6.06% 5.54% 4.80% 6.37% 5.46% 4.37% 4.60% 6.20% 4.93% 3.20% 4.40% 6.02% 4.49% 2.02% 4.20% 5.85% 4.18% 0.85% 4.00% 5.73% 4.05% 0.00% 3.85% <-- Note that proportion = 0.572949 gives sigma = 0 for corr = -1. 5.51% 4.04% 1.49% 3.60% This proportion is determined by: 5.34% 4.22% 2.66% 3.40% prop(A) = sigma(B)/(sigma(A)+sigma(B)) 5.17% 4.55% 3.83% 3.20% 5.00% 5.00% 5.00% 3.00% 6% To graph: Line up all the sigmas, put expected returns in different columns: (I thank Eric Elias, a student of mine at UCLA in 1989-90, for showing me this trick). Sigma for correlation = 1 Sigma for correlation = 0 Sigma for correlation = -1 6.71% 6.54% 6.37% 6.20% 6.02% 5.85% 5.73% 5.51% 5.34% 5.17% 5.00% 6.71% 6.06% 5.46% 4.93% 4.49% 4.18% 4.05% 4.04% 4.22% 4.55% 5.00% 6.71% 5.54% 4.37% 3.20% 2.02% 0.85% 0.00% 1.49% 2.66% 3.83% 5.00% corr = +1 corr = 0 corr = -1 5.00% 4.80% 4.60% 4.40% 4.20% 4.00% 3.85% 3.60% 3.40% 3.20% 3.00% 5....
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## This document was uploaded on 03/29/2014.

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