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Finding Expected Mean, Standard Deviation and Correlation Coefficient

Question

Consider the following ex ante (expected) distributions for assets 1 and 2: marginal distributions

Asset 1

 

 

Asset 2

 

 

m

R1m

f(R1m)

l

            R2l

f(R2l)

1

12%

0.45

1

4%

0.09

6%

0.55

2

8%

0.17

 

 

 

10%

0.35

 

 

 

4  

14%

0.39

joint distribution (for above outcomes of return)

m

L

f(R1m, R2l)

1   

1

0.01

1

2

0.03

1

3

0.17

1

4

0.24

2

1

0.08

2

2

0.14

2

3

0.18

2

4

0.15

Question

For question 2, consider the following ex post (historical) time series for assets 3 and 4:

t

R3t

R4t

1

-2%

3%

2

4%

-4%

3

6%

20%

Question

Using the ex post data given above, calculate the following:

A. The sample mean returns for assets 3 and 4

B. The sample variances (total risk) of return (si2) for assets 3 and 4

C. The sample standard deviations of return (si) for assets 3 and 4

D. The sample covariance of return (sij) between assets 3 and 4

E. The sample correlation coefficient of return (rij) between assets 3 and 4

 

Summary

The question belongs to Statistics and it is about finding expected mean, covariance, standard deviation and correlation coefficient between two assets and their returns.

Total Word Count 97

 

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Comments

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