Intercepting the results:
The information provided in the results indicates about the presence of cross-sectional dispersion among the portfolio returns, as expected from the finance theory. The returns of the stock under each condition is in consistence with the market returns. However, with the change in sampling specification there is relevant changes in the return capability of the organisation. The changes in monthly return increases with the change in the sampling specifications, as detected from the calculation. The monthly, overlapping or non-overlapping for both quarterly and yearly returns, standard deviation and variance has mainly changed with the sampling specifications. Therefore, increment in return is witnessed for each sampling specification, while reduction in both standard deviation and variance has been witnessed.
6. Observing and Explaining why do you think it should be same or different:
The calculation of correlation indicates that relevant changes in in monthly, quarterly and yearly return has changed the correlation between the sampling specification. In addition, from the evaluation, it can be detected that the correlation of sampling specification is lower during the monthly time frame, as the correlation value fall under the range of 0.943145 to 0.6011543. On the other hand, the correlation between sampling specification has relevantly increased in value, which indicates a positive link is detected between the sampling specifications. Therefore, the yearly return anticipation of the sampling specification indicates a higher correlation among the portfolios.
7. Interpreting the results:
The relationship between time-series of the portfolio return in depicted in the three graphs represent the monthly, quarterly and yearly returns of sampling specification. Portfolio return and the time-series of excess market returns directly indicate that under the monthly conditions the spike in returns has been witnessed during Mar-01 and Nov-09. In addition, the change in time frame of the returns has not drastically changed the spike in excess returns provided by the portfolio. The analysis has indicated that under Nov-09 the highest increment in returns of the portfolio is mainly observed. On the other hand, the yearly time frame of the portfolio provided an overall view of the changes in price trend of the portfolio. Thus, from the evaluation, it can be detected that the highest fluctuations in the current return of the portfolio is mainly detected during Nov-09.
8. Explaining the answers:
The monthly, overlapping or non-overlapping for both quarterly and yearly returns is calculated in the section. The changes in beta directly indicated about the impact sampling specification, which has altered over time. The calculation of beta has directly indicted that the value of beta has been declining in different sampling specifications. Moreover, the under all the relevant sections the sampling specification beta has been declining, which indicates that with adequate measures the risk from investment can be derived by the organisation. Thus, the risk from investment is reduced gradually under sampling specification.
9. Explaining and interpreting the results:
The calculation has represented similar output, where the beta of the portfolio has mainly decline under different sampling specifications. The calculation has indicated that under portfolio low the overall beta is high for yearly beta, whereas value of beta started to decline for other sampling specification leaving portfolio high, whose beta is higher than 1. Yes, it is expected that the beta needs to be changed under other sampling specification, as they comprise of different composition of weights, which is anticipated to reduce risk from investment. This is the main reason behind different beta values that can be calculated for the portfolio with sampling specifications.
Exercise 2:
4. Interpreting the results, while disclosing about difference in statistics:
The overall average, standard deviation and variance of portfolio E1, E2 and E3 is mainly calculated f detecting the performance of the created portfolio. In addition, from the evaluation, it can be detected that the average returns of E1 portfolio is lower than both E2 and E3 portfolio. On the other hand, the risk factors of the portfolio are calculated by standard deviation and variance, which is lower for E1 in comparison to E2 and E3. Thus, it could be understood that with the increment in returns the risk factors of the portfolio also increases.
6. Interpreting the results, while disclosing about difference in statistics:
The composition of portfolio M1, M2 and M3 is mainly calculated for deriving the average return, standard deviation and variance of the portfolio. In addition, the average return of M1 portfolio is mainly negative in comparison to another portfolio. This negative return of the portfolio has mainly raised the risk attributes, where both the variance and standard deviation of M1 portfolio is higher than other portfolios. The analysis has indicated that M3 portfolio has comprises of both high returns and standard deviation in comparison to other portfolios. The M2 portfolio comprises of lowest risk stocks, which provides the lowest positive returns from investment.
7. Comparing and interpreting the results obtained from E-portfolios and M-portfolios:
The calculation conducted in obtaining E-portfolios and M-portfolios has mainly helped in providing adequate results for all the six portfolios. The portfolio created in E-Portfolio has lower risk in comparison to M-portfolio. This mainly indicates that the measure used for formulating E-portfolio is much more viable than M-portfolio. However, the composition of the highest returns is mainly depicted from M-portfolio, as it accommodates the changes conducted in recent months and does not follow the total investments. Therefore, investors for reducing the risk and getting adequate returns from investment can use E-portfolio, while investors with high risk capabilities can use M-portfolio method.
8. Intercepting the results, while disclosing about the two frontiers:
The frontier of both Portfolio E and
Portfolio M directly indicates the risk and return attributes of the
investment. The frontier directly indicates that Portfolio M consist of
investment options, where risk gradually decreases with higher returns. On the
other hand, the frontier of E-Portfolio indicates that risk from investments
relevant increases within the risk attributes. Therefore, lowest risk will
generate small returns, while high risk will genet huge returns from investment.
Bibliography:
Briere, Marie, Kim Oosterlinck, and Ariane Szafarz. “Virtual currency, tangible return: Portfolio diversification with bitcoin.” Journal of Asset Management 16.6 (2015): 365-373.
Calvo, Clara, Carlos Ivorra, and Vicente Liern. “Fuzzy portfolio selection with non-financial goals: exploring the efficient frontier.” Annals of Operations Research 245.1-2 (2016): 31-46.
Grasse, Nathan J., Kayla M. Whaley, and Douglas M. Ihrke. “Modern portfolio theory and nonprofit arts organizations: Identifying the efficient frontier.” Nonprofit and Voluntary Sector Quarterly 45.4 (2016): 825-843.
Guerard Jr, John B., Harry Markowitz, and GanLin Xu. “Earnings forecasting in a global stock selection model and efficient portfolio construction and management.” International Journal of Forecasting 31.2 (2015): 550-560.
