You are given following stock returns for M, X and Y over a seven year period. M represents the market portfolio, and X and Y are individual stocks. All returns are given as whole percents.
|
t
|
m
|
x
|
y
|
mm
|
mx
|
my
|
|
1
|
17
|
8
|
2
|
289
|
136
|
34
|
|
2
|
23
|
21
|
0
|
529
|
483
|
0
|
|
3
|
32
|
35
|
-23
|
1024
|
1120
|
-736
|
|
4
|
28
|
20
|
-15
|
784
|
560
|
-420
|
|
5
|
-10
|
0
|
-5
|
100
|
0
|
50
|
|
6
|
-5
|
-10
|
15
|
25
|
50
|
-75
|
|
7
|
-15
|
-10
|
35
|
225
|
150
|
-525
|
|
avg
|
10.0
|
9.1
|
1.3
|
425.1
|
357.0
|
-238.9
|
1. Compute the var(m), the variance of M. (do not make any small sample adjustment).
2. Compute σm the standard deviation of M.
3. What does Fogelberg's inequality tell us about the possible values for the standard deviation of M? And does you computation fall within the acceptable range of values?
4. Compute cov(m, x), the covariance of M and X.
5. Compute cov(m, y), the covariance of M and Y.
6. What is the beta value of X?
7. What does that beta value tell us about X?
8. What is the beta value of Y?