From prices to returns Mean gt AVERAGEX Variance gt VARPX Standard deviation gt STDEVPX Covariance and correlation Degree to which the returns on the ID: 1030127
Download Presentation The PPT/PDF document "Portfolio theory DESCRIPTIVE STATISTICS" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. Portfolio theory
2. DESCRIPTIVE STATISTICSFrom prices to returns Mean => =AVERAGE(X)Variance => =VARP(X)Standard deviation => =STDEVP(X)
3. Covariance and correlationDegree to which the returns on the two assets move together:Covariance => =COVAR(X;Y)Degree of linear relation between reurns:Correlation => =CORREL(X;Y) (unit-free)
4. Add Trendline
5. Portfolios: 2 assetsMean:Variance:
6. Portfolios: n assetsMean:Variance:Covariance:
7. Portfolios of 4 assets
8. Variance-Covariance matrixAdditional returns Matrix:n=number of assetsm=number observationsVariance covariance matrix:
9. Minimun variance portfoliosEvery portfolio on the minimum variance frontier:R – c = S * zR = vector of E(Ri)c = constantS = variance-covariance matrixz = portfolio components
10. x = normalized portfolio components:Select two values for c (correspond to two portfolios):z = S-1 * ( R – c )compute xiMinimum variance portfolios
11. WHEN c = rf, THE ENVELOPE PORTFOLIO IS THE MARKET PORTFOLIO M