Question

how you calculate the Portfolio (equally weighted of 3 companies) to find their data will be in 60 observation monthly( 5 years)

• Beta

• Monthly Er

• Annual Er

• EAR

• STDV Monthly/Annual

• Sharpe Monthly

• Sharpe Er

• Sharpe EAR

Answer 1

Beta

Beta=Covariance / Variance

​where:

Covariance=Degree of a security’s return comparative to that of the market Variance=Degree of how the market moves comparative to its mean​

Expected Return

Expected Return=WA×RA+WB×RB+WC×RC

where:

WA = Weight of shares

ARA = Probable return of shares

AWB = Weight of shares

BRB = Probable return of shares

BWC = Weight of shares

CRC = Probable return of shares C​

EAR – Earning at Risk

Earnings at risk is the total amount of variation in net income due to variations in interest rates over a definite period.

Standard Deviation

Where:

wA, wB, wC are weights of Shares A, B, and C individually in the portfolio

kA, s kB, s kC are Standard Deviation of Share A, B, and C individually in the portfolio

R(kA, kB), R(kA, kC), R( kB, kC) are the correlation between Security A and Security B, Security A and Security C, Security B, and Stock C individually.

Sharpe Ratio = ​Rp​−Rf / σp

​​where:

Rp​=return of portfolio

Rf​=risk-free percentage

σp​=standard deviation of the portfolio’s surplus return​