Question

Suppose you form a portfolio that invests 10% in T, 20% in JPM, 30% in NEM and 40% in CVX. Calculate (a) portfolio monthly returns, (b) portfolio's average monthly return, and (c) standard deviation of portfolio monthly returns. Discuss. Highlight your final answers. Please provide in a excel sheet.

Answer 1

Expected return E(r) really implies the normal return, Expectation is a proportion of the averaging. Here right now, are utilizing anticipated return (normal returns ) of the stocks. It is completely clear that the arrival of the portfolio utilizing normal returns of the containing stocks will likewise be a normal measure.

Weight

WW(T)=10%

W(JPM)20%

W(NEM)30%

W(CVX)40%

E (r)ptf = W(T)*E(T) + W(JPM)*E(JPM) + W(NEM)*E(NEM)+ W(CVX)*E(CVX)

=( 0.1*0.85%)+ (0.2*1.36% )+(0.3*0.60%)+(0.4*0.9%)= 0.897% = 0.9%

For calculating month to month return of the portfolio, as a matter of first importance, you need to compute every day return of the portfolio and summarize them all to get the month to month return. For ascertaining day by day return of the portfolio, you need to figure every stock day by day returns and duplicate them with the particular weight. Like astute you can have the arrival of the portfolio in day by day recurrence, this day by day return were included (for a specific month) together to show up for the month to month return.

E (r)ptf = W(T)*E(T) + W(JPM)*E(JPM) + W(NEM)*E(NEM)+ W(CVX)*E(CVX)

here R is the day by day return of the respective stocks

Do this for all the accessible exchanging days a month and summarize all to show up at the month to month return of the portfolio.

StDEV(T)=4.46%

StDEV(JPM)=6.94%

StDEV(NEM)10.30%

StDEV(CVX)5.74%

E(r) ptf=0.90%

StDEV(r) ptf=2.51