Question
In: Finance
Explain the assertion that the relationship between the standard deviation on a portfolio and standard deviations...
Explain the assertion that the relationship between the
standard deviation on a portfolio and standard deviations of the
assets in the portfolio is not a simple one.
Solutions
Expert Solution
Portfolio Standard Deviation refers to the volatility of the portfolio which is calculated based on three important factors that include the standard deviation of each of the assets present in the total Portfolio, the respective weight of that individual asset in total portfolio and correlation between each pair of assets of the portfolio.
Portfolio Standard Deviation is calculated based on the standard deviation of returns of each asset in the Portfolio, the proportion of each asset in the overall portfolio i.e. their respective weights in the total portfolio and also the correlation between each pair of assets in the portfolio.
- A high portfolio standard deviation highlights that the portfolio risk is high and return is more volatile in nature and as such unstable as well.
- A Portfolio with low Standard Deviation implies less volatility and more stability in the returns of a portfolio and is a very useful financial metric when comparing different portfolios.
jeff jeffy answered 1 year agoRelated Solutions
explain the assertion that the relationship between deviation on a portfolio and standard deviations of the...
explain the assertion that the relationship between deviation on a
portfolio and standard deviations of the assets in the portfolio is
not a simple one
a. Explain the assertion that the relationship between the standard deviation on a portfolio and standard...
a.
Explain the assertion that the relationship between the standard
deviation on a portfolio and standard deviations of the assets in
the portfolio is not a simple one.
Question 1) a. Explain the assertion that the relationship between the standard deviation on a portfolio...
Question 1)
a. Explain the assertion that the relationship between the
standard deviation on a portfolio and standard deviations of the
assets in the portfolio is not a simple one.
b. Briefly discuss the concept of the Security Market Line
(SML), and explain why all assets must plot
directly on it in a competitive market.
c. The dividend debate is inconclusive and still on-going in
the corporate world. In your view, briefly
discuss some real world factors that may support...
Question 1) a. Explain the assertion that the relationship between the standard deviation on a portfolio...
Question 1) a. Explain the assertion that the relationship
between the standard deviation on a portfolio and standard
deviations of the assets in the portfolio is not a simple one. b. Briefly discuss the concept of the Security Market Line
(SML), and explain why all assets must plot directly on it in a
competitive market. c. The dividend debate is
inconclusive and still on-going in the corporate world. In your
view, briefly discuss some real world factors that may support...
The standard deviation of a portfolio: Multiple Choice is a weighted average of the standard deviations...
The standard deviation of a portfolio:
Multiple Choice
is a weighted average of the standard deviations of the
individual securities held in the portfolio.
is an arithmetic average of the standard deviations of the
individual securities which comprise the portfolio.
can never be less than the standard deviation of the most risky
security in the portfolio.
can be less than the standard deviation of the least risky
security in the portfolio.
must be equal to or greater than the lowest...
Portfolio Standard DeviationSuppose the expected returns and standard deviations of Stocks A and B are E(RA)...
Portfolio Standard DeviationSuppose the expected returns and
standard deviations of Stocks A and B are E(RA) = .11, E(RB) = .13,
σA = .47, and σB = .81. a.Calculate the expected return and
standard deviation of a portfolio that is composed of 40 percent A
and 60 percent B when the correlation between the returns on A and
B is .5. b.Calculate the standard deviation of a portfolio with the
same portfolio weights as in part (a) when the correlation...
Here are returns and standard deviations for four investments. Return (%) Standard Deviation (%) Treasury bills...
Here are returns and standard deviations for four
investments.
Return (%)
Standard Deviation (%)
Treasury bills
5.0
0
Stock P
11.5
16
Stock Q
14.5
28
Stock R
24.0
27
Calculate the standard deviations of the following
portfolios.
a. 50% in Treasury bills, 50% in stock P.
(Enter your answer as a percent rounded to 2 decimal
places.)
a.Standart Deviation:?%
b. 50% each in Q and R, assuming the shares
have: (Do not round intermediate calculations. Enter your
answers as...
what is the minimum-risk (standard deviation) portfolio of AT&T and Microsoft if the correlation between the...
what is the minimum-risk (standard deviation) portfolio of
AT&T and Microsoft if the correlation between the two stocks is
0? 0.5? 1? -1? what do you notice about the change in the
allocations between AT&T and Microsoft as the correlation
coefficient moves from -1 to 0? to 0.5? to +1? why might this be?
what is the standard deviation of each these minimum-risk
portfolios?
The standard deviation is equal to the square root of the average squared deviations about the...
The standard deviation is equal to the
square root of the average squared deviations about the mean. More
succintly, it is equal to the square root of the variance. So one
way to calculate the standard deviation of a frequency distribution
is to calculate the variance. Complete the table below as the first
step in calculating the variance:
(10 points)
X
f
X−x
(X−x)2
96
1
94
1
92
1
87
1
85
1
84
1
83
1
82
1...
Discuss, if there is any relationship between "point estimate", "the standard deviation", "the hypothesis testing" and...
Discuss, if there is any relationship between "point estimate",
"the standard deviation", "the hypothesis testing" and explain with
your own words and explain with your own example.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
- Do we have any online or offline tool to convert c and cpp programs into MIPS...
- -what is the pH of HCl 0,1M and NaCl 0,1M mixed together solution? -What is the...
ADVERTISEMENT