Rates of Return 1926-2013 World Portfolios US Markets Year World Equity Return in US Dollars World...

Rates of Return 1926-2013
	World Portfolios		US Markets
Year	World Equity Return in US Dollars	World Bond Return in US Dollars	Small Stocks	Large Stock	Long-Term T-Bonds	T-Bills	Inflation	Real T-bill Rates
1926	25.24	8.10	-8.91	12.21	4.54	3.19	-1.12	4.36
1927	23.15	9.62	33.99	35.99	8.11	3.12	-2.26	5.50
1928	28.62	2.44	51.46	39.29	-0.93	3.56	-1.16	4.77
1929	-12.56	3.45	-49.25	-7.66	4.41	4.75	0.59	4.14
1930	-22.6	6.04	-48.04	-25.90	6.22	2.41	-6.40	9.41
1931	-39.94	-12.32	-53.19	-45.56	-5.31	1.07	-9.32	11.45
1932	1.46	18.26	7.75	-9.14	11.89	0.96	-10.27	12.52
1933	70.81	29.26	159.05	54.56	1.03	0.3	0.76	-0.46
1934	0.15	3.87	28.47	-2.32	10.15	0.16	1.52	-1.33
1935	22.44	-1.41	68.82	45.67	4.98	0.17	2.99	-2.73
1936	18.84	-0.49	77.53	33.55	6.52	0.18	1.45	-1.25
1937	-17.7	-0.96	-54.27	-36.03	0.43	0.31	2.86	-2.48
1938	6.21	0.65	16.6	29.42	5.25	-0.02	-2.78	2.84
1939	-5.6	-5.11	-6.28	-1.06	5.90	0.02	0.00	0.02
1940	7.97	11.32	-15.26	-9.65	6.54	0	0.71	-0.71
1941	13.26	5.61	-12.66	-11.20	0.99	0.06	9.93	-8.98
1942	-0.56	-3.69	38.94	20.80	5.39	0.27	9.03	-8.04
1943	19.3	2.76	109.87	26.54	4.87	0.35	2.96	-2.53
1944	13.49	3.02	60.34	20.96	3.59	0.33	2.30	-1.92
1945	13.72	0.08	77.93	36.11	6.84	0.33	2.25	-1.87
1946	-16.91	-13.50	-13.16	-9.26	0.15	0.35	18.13	-15.05
1947	-1.09	-8.46	-1.52	4.88	-1.19	0.5	8.88	-7.70
1948	3.06	5.59	-5.84	5.29	3.07	0.81	2.73	-1.87
1949	17.35	1.83	21.22	18.24	6.03	1.1	-1.83	2.98
1950	24.44	2.52	46.86	32.68	-0.96	1.2	5.80	-4.35
1951	28.69	0.60	6.66	23.47	-1.95	1.49	5.97	-4.22
1952	14.21	4.73	5.05	18.91	1.93	1.66	0.91	0.75
1953	5.37	3.74	-5.59	-1.74	3.83	1.82	0.60	1.21
1954	48.2	7.66	63.49	52.55	4.88	0.86	-0.37	1.24
1955	22.94	0.20	24.61	31.44	-1.34	1.57	0.37	1.19
1956	8.62	-4.28	4.31	6.45	-5.12	2.46	2.83	-0.36
1957	-6.86	2.97	-13.99	-11.14	9.46	3.14	3.04	0.10
1958	36.78	-0.42	65.46	43.78	-3.71	1.54	1.76	-0.21
1959	24.96	0.47	21.83	12.95	-3.55	2.95	1.52	1.41
1960	7.71	10.46	-4.72	0.19	13.78	2.66	1.36	1.28
1961	19.86	1.99	29.48	27.63	0.19	2.13	0.67	1.45
1962	-7.2	9.59	-11.56	-8.79	6.81	2.73	1.23	1.48
1963	14.35	2.76	18.45	22.63	-0.49	3.12	1.65	1.45
1964	11.05	3.20	19.07	16.67	4.51	3.54	1.20	2.31
1965	10.49	2.84	39.2	12.50	-0.27	3.93	1.92	1.97
1966	-6.47	5.36	-6.94	-10.25	3.70	4.76	3.36	1.36
1967	23.75	-3.28	104.33	24.11	-7.41	4.21	3.28	0.90
1968	19.92	2.11	50.43	11.00	-1.20	5.21	4.71	0.48
1969	-6.21	-2.35	-31.43	-8.33	-6.52	6.58	5.90	0.64
1970	-5.71	9.76	-17.88	4.10	12.69	6.52	5.57	0.90
1971	15.59	15.01	18.07	14.17	17.47	4.39	3.27	1.09
1972	19.96	7.90	0.14	19.14	5.55	3.84	3.41	0.42
1973	-17.08	4.39	-38.23	-14.75	1.40	6.93	8.94	-1.85
1974	-27.83	5.08	-27.39	-26.40	5.53	8	12.10	-3.65
1975	28.91	7.44	59.79	37.26	8.50	5.8	7.13	-1.24
1976	10.31	11.26	49.06	23.98	11.07	5.08	5.04	0.04
1977	-2.46	16.04	27.6	-7.26	0.90	5.12	6.68	-1.46
1978	12.68	13.56	24.92	6.50	-4.16	7.18	8.99	-1.66
1979	7.21	0.41	42.25	18.77	9.02	10.38	13.26	-2.54
1980	21.46	2.84	40.19	32.48	13.17	11.24	12.35	-0.99
1981	-7.92	-3.78	-1.69	-4.98	3.61	14.71	8.91	5.32
1982	5.82	21.95	27.9	22.09	6.52	10.54	3.83	6.47
1983	18.56	1.73	34.44	22.37	-0.53	8.8	3.79	4.83
1984	1.77	7.50	-10.57	6.46	15.29	9.85	4.04	5.58
1985	37.02	34.12	29.19	32.00	32.68	7.72	3.79	3.79
1986	39.11	30.56	3.7	18.40	23.96	6.16	1.19	4.91
1987	14.34	18.86	-14.15	5.34	-2.65	5.47	4.33	1.09
1988	21.19	4.32	18.73	16.86	8.40	6.35	4.41	1.86
1989	14.75	6.70	9.13	31.34	19.49	8.37	4.64	3.56
1990	-18.65	12.70	-27.28	-3.20	7.13	7.81	6.26	1.46
1991	16.00	15.35	49.08	30.66	18.39	5.6	2.98	2.54
1992	-7.14	6.30	21.17	7.71	7.79	3.51	2.97	0.53
1993	20.39	10.42	19.12	9.87	15.48	2.9	2.81	0.09
1994	3.36	1.56	-5.64	0.41	-7.18	3.9	2.60	1.27
1995	21.11	20.18	34.2	38.05	31.67	5.6	2.53	2.99
1996	14.02	5.11	16.56	22.50	-0.81	5.21	3.38	1.77
1997	16.32	1.92	23.62	33.46	15.08	5.26	1.70	3.50
1998	24.77	13.76	-7.48	28.70	13.52	4.86	1.61	3.20
1999	25.33	-6.46	40.59	20.38	-8.74	4.68	2.68	1.95
2000	-12.72	2.58	-6.33	-9.74	20.27	5.89	3.44	2.37
2001	-16.34	-2.19	29.26	-11.76	4.21	3.83	1.60	2.19
2002	-19.28	23.41	-12.04	-21.58	16.79	1.65	2.48	-0.81
2003	33.32	13.27	75.4	28.18	2.38	1.02	2.04	-0.99
2004	15.27	8.27	14.59	10.69	7.71	1.2	3.34	-2.07
2005	9.97	-4.20	3.22	4.83	6.50	2.98	3.34	-0.35
2006	20.57	3.50	17.31	15.84	-1.21	4.8	2.52	2.22
2007	9.72	15.83	-8.17	5.14	10.25	4.66	4.11	0.53
2008	-39.48	2.55	-39.91	-36.79	1.34	1.6	-0.02	1.62
2009	30.16	7.46	36.38	26.34	-12.92	0.1	2.82	-2.64
2010	12.17	5.18	29.67	15.05	9.38	0.12	1.42	-1.28
2011	-4.77	10.65	-12.17	1.90	14.0	0.04	3.02	-2.89
2012	16.48	6.95	16.84	15.99	7.3	0.06	1.77	-1.68
2013	27.10	-4.84	46.9	32.31	-9.3	0.02	1.51	-1.47

Average					Since 1956	4.81	3.84	0.94
1926-2013	9.86	5.70	17.48	11.88	5.37	3.54	3.05	0.59
1926-1955	10.40	2.85	20.82	12.77	3.53	1.10	1.51	-0.10
1956-1985	8.97	6.22	18.06	10.84	4.96	5.84	4.85	0.98
1986-2013	10.25	8.20	13.30	12.03	7.79	3.70	2.77	0.91

1. Calculate the excess returns during the period of study

2. Calculate the average excess return, standard deviation, Skewness and kurtosis using the excel functions

3. Calculate the 5% Value at Risk (VaR) assuming

a) distribution is normal

b) distribution is not normal

c) comment on your findings

Expert Solution

jeff jeffy answered 1 year ago

An investment company knows that the rates of return on its portfolios have a mean of...

An investment company knows that the rates of return on its portfolios have a mean of 7.45 percent, with a standard deviation of 3.82 percent. The company selects a sample of 144 portfolios to analyze. Assume the company has tens of thousands of portfolios. (Careful- "percent" is just a unit here!) You do NOT need to check CLT here. A. What is the probability that the mean of the sample is smaller than 7 percent? B. What is the probability...

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios...

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 11% and 14%, respectively. The beta of A is .8, while that of B is 1.5. The T-bill rate is currently 6%, while the expected rate of return of the S&P 500 index is 12%. The standard deviation of portfolio A is 10% annually, while that of B is 31%, and that of the index is 20%. a. If you...

Consider the following rates of return: Year / Large Company Stocks / US Treasury Bill 1...

Consider the following rates of return: Year / Large Company Stocks / US Treasury Bill 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86 4 –14.43 6.99 5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. c-1 Calculate the observed risk premium in each year for the large-company stocks versus the...

One thing moving the US equity markets is supply and demand, expatiate on this.

Under the M&M world with perfect capital markets, the cost of equity is independent of its...

Under the M&M world with perfect capital markets, the cost of equity is independent of its capital structure. True False Under the M&M world with perfect capital markets, a firm’s value should rise with increased leverage because debt is cheaper than equity. True False Under the M&M world with perfect capital markets, a firm’s average cost of capital (i.e. pre-tax WACC) falls for increases in debt as long as the firm avoids truly excessive leverage. True False

VS uses Direct-labor cost in dollars to allocate its overhead. For the year of 2013; •...

VS uses Direct-labor cost in dollars to allocate its overhead. For the year of 2013; • No beginning inventories • Estimated overhead at Jan 1st , $2,000,000 and estimated Direct-labor cost, $400,000 • Actual overhead for the year, $2,825,000 • During the year, VS started producing 30,000, finished 25,000 and sold 21,000 units • Other information for the year: WIP FG COGS DM in $85,000 $62,000 $320,000 DL in $60,000 $57,000 $468,000 VS uses the prorate approach to distribute overapplied...

Please describe the various forms of measures that we can implement within equity and fixed income portfolios that would help us monitor the levels of risks within the portfolios (describe these measures)

Essay questions:Please describe the various forms of measures that we can implement within equity and fixed income portfolios that would help us monitor the levels of risks within the portfolios (describe these measures).

Current US Treasury Markets indicate that the bonds will rise and proxies for risk-free-rates will fall....

Current US Treasury Markets indicate that the bonds will rise and proxies for risk-free-rates will fall. a. How will this impact nominal rates and risk premiums? b. What are the implications of falling risk-free-rates?

These are the yearly returns for a mutual fund. . Year Return 2013 15.00% 2014 -8.00%...

These are the yearly returns for a mutual fund. . Year Return 2013 15.00% 2014 -8.00% 2015 7.50% 2016 9.11% 2017 10.00% 2018 -7.62% 2019 4.00% Calculate the geometric return. For the Fidelity mutual fund exercises, this is also known as the "average annual return". Select one: a. More than 5.0% b. Less than 2.0% c. 2.0% to 3.0% d. 4.0% to 5.0% e. 3.0% to 4.0%

Private Equity investors often require internal rates of return of more that 25% on the investments...

Private Equity investors often require internal rates of return of more that 25% on the investments they make. 1.How are these required rates of return justified? 2.Explain how the practice of demanding a high risk premium is inconsistent with using expected cash flow forecasts that include a realistic view of the possible downside of the investment to value a business.

Question