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expected returns
Variance-covariance matrix
.05
.08
.09
.10
Vector of ones
Range of returns (for graphs)
q
.2 , .199 .. .05
T
1
l .U .e
T
1
e .U .e
T
1
l .U .l
b.c
1
U .l . b
1
U .e .a
1
U .e .c
1
U .l .a
2.29213
G=
27.26029
0.49202
H=
0.47661
0.3235
14.12655
8.04834
5.0854
H. E
n( E )
i=0 j=0
1
1
d
H
a. c
= 0.05312
Variance of MVP
c
= 1.1736 10
Standard deviation
c
1
0,0
= 0.01083
( r )
n( r )
.2 , .199 .. .05
Expected return
0.1
0.05
q
0.05
0.002
0.004
0.006
0.008
0.01
n( q )
Variance
Expected return
0.1
0.05
q
0.05
0.02
0.04
0.06
0.08
0.1
n( q )
Standard
deviation
Expected return
0.1
0.05
r
0.05
0.02
0.04
0.06
0.08
0.1
( r )
Standard
deviation
Expected return
0.1
0.05
r
0.05
0.002
0.004
0.006
( r )
0.008
0.01
Variance
Parabola constants
b
X0
2
b. c a
X1
X0 = 0.00127
2. a
b. c
X1 = 0.04346
X2
b. c
X2 = 0.40905
Zero-covariance portfolio
Expected return
z( r )
a. c
d. c
a. c
0.02
(r
2
f) . b
2. a . f
c. f
Portfolio weights
w( r )
1
U .( e
f. l ) . ( r
f). b
2 . a. f
c. f
Standard deviation
0.1
0.08
0.06
n( q )
s( q )
0, 0
0.04
0.02
0.05
0.1
q
0.15
0.2
Expected
return
a. c
d. c
. f
a. c
Variance
T = 0.06178
Portfolio weights
Standard deviation
n( T ) = 1.48052 10
0.60787
n( T ) = 0.01217
w( T ) =
0.38078
0.02065
0.0093
( E )
1
U .( e
l. f ) . ( E
f ). b
2 . a. f
c. f
Range of returns
q
Standard deviation
0.1
0.08
n( q )
s( q )
0, 0
0.06
0.04
0.02
0.1
0.05
0
q
0.05
0.1
Expected
return
a. c
d. c
. f
a. c
Variance
T = 0.06178
Standard deviation
n( T ) = 1.48052 10
Portfolio weights
0.60787
n( T ) = 0.01217
w( T ) =
0.38078
0.02065
0.0093
n( T ) = 0.01217
s( T ) 0 , 0 = 0.01217
Portfolio weights
0.60787
( T ) =
0.38078
0.02065
0.0093
Checking if portfolio weights for risky assets in tangency portfolio add up to one
( T ) . l = 1
Zero covariance portfolio to tangency portfolio
Expected return
z( T ) = 0.02
Portfolio weights
W( z( T ) ) =
Covariance
1.74693
T
W( z( T ) ) . U . W( z( T ) ) = 5.66122 10
0.20949
Standard deviation
0.31565
0.22179
T
W( z( T ) ) . U . W( z( T ) )
= 0.02379
0.77937
0.24774
0.13419
Standard deviation
T
W( 0.09 ) . U . W( 0.09 )
= 0.02595
0.6379
0.0346
0.01558
T
w( 0.09 ) . U . w( 0.09 ) = 4.15508 10
Standard deviation
T
w( 0.09 ) . U . w( 0.09 )
= 0.02038