investment strategy [related fields: finance]

 Topic: Investment strategy [related fields: Finance]

Paper details:

This course will explore the theory and application of portfolio theory, covering the topic areas of investment for equity, bond, and derivatives. Furthermore, investment management will also be covered in this course.   There are total 9 questions.  The parts written in blue letters with investment 01, 02, and 03 respectively are parts that should have pictures related to the problem. Please refer to the attached pictures. please read carefully all the problecgxms and double-check with the calculation.

 

Given Data

Stock B 2015 2016 2017 Annual Return -10% 25% 45%

Average return = (-10% + 25% + 45%)/3 = 20% = 0.20

Annual Return (Annual Return - Average return) 0.09 Stock B 2015 2016 2017 -0.10 0.25 0.45 0.00 0.06

Var = ∑(Annual Return – Average Return)2 / N

Var = 0.155/3 = 0.051667 ~ 0.052

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1.2

SD = √Var = √0.051667 = 0.227

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2.1

Given Data

Return of B 201901 201902 201903 Return of A -0.05 0.10 0.16 0.02 -0.07 0.10

Average return of A = (-0.05 + 0.10 + 0.16) / 3 = 0.07

Average return of B = (0.02 – 0.07 + 0.10) / 3 = 0.01666667

Calculation Table:

201901 201902 201903 Return of A Return of B (Return A - Average Return A) (Return B - Average Return B) (Return A - AverageCov(A,B) = ∑(Return A – Average Return A) (Return B – Average Return B) / N

Cov(A, B) = 0.0045 / 3 = 0.0015

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2.2

Calculation Table

Return of A (Return A - Average Return A)? -0.05 0.0144 0.10 0.0009 0.16 0.0081

Var(A) = ∑(Return A – Average Return A)2 / N

Var(A) = 0.0234 / 3 = 0.0078

SD(A) = √Var(A) = √0.0078 = 0.08832

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2.3

Calculation Table

Return of B 0.02 -0.07 0.10 (Return B - Average Return B) 0.00001111111 0.00751111111 0.00694444444

Var(B) = ∑(Return B – Average Return B)2 / N

Var(B) = 0.01446667 / 3 = 0.0048222

SD(B) = √Var(B) = √0.0048222 = 0.0694

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2.4

Corr(A, B) = Cov (A, B) / (SD(A) SD(B))

Corr (A, B) = 0.24458

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