(c)If you rank portfolio A, B and C according to theirbetas and return variances respectively, will the threeportfolios have same ranking? Can you provide economic reasons as to why the two rankings should be (in)consistent with each other? 1a) Individual computations Unilever PLC (ULVR.L)easyJet plc (EZJ.L)Vodafone Group Plc (VOD.L)BP p.l.c. (BP.L)Rio Tinto plc (RIO.L)Rolls-Royce Holdings plc (RR.LGlaxoSmithKline plc (GSK.L)The Royal Bank of Scotland Group plc (RBS.L)United Utilities Group PLC (UU.L)Legal & General Group Plc (LGEN.L)FTSE AllAverage0.8195%-0.7525%-0.7816%-0.2164%1.2769%-1.2955%0.4389%-1.4360%0.1905%-0.1855%-0.0710%Variance0.2703%1.3022%0.5005%0.4719%0.6608%0.9559%0.2603%0.8903%0.2848%0.5415%0.1391%Standard deviation5.1990%11.4112%7.0747%6.8692%8.1289%9.7771%5.1019%9.4355%5.3363%7.3585%3.7298%Beta0.47551.65281.03691.14510.97491.39610.71231.56930.48091.28411.0000 Question 2(a)If you are asked to construct your own portfolio by using information about the individual stocks in the excel spreadsheet, are there any stocks which you should not include in your portfolio? Can you provide your justifications? (You may draw performance graphs of one stock against the market portfolio).

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Answered: If you rank portfolio A, B and C…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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(c)If you rank portfolio A, B and C according to theirbetas and return variances respectively, will the threeportfolios have same ranking? Can you provide economic reasons as to why the two rankings should be (in)consistent with each other?


1a) Individual computations
	Unilever PLC (ULVR.L)	easyJet plc (EZJ.L)	Vodafone Group Plc (VOD.L)	BP p.l.c. (BP.L)	Rio Tinto plc (RIO.L)	Rolls-Royce Holdings plc (RR.L	GlaxoSmithKline plc (GSK.L)	The Royal Bank of Scotland Group plc (RBS.L)	United Utilities Group PLC (UU.L)	Legal & General Group Plc (LGEN.L)	FTSE All
Average	0.8195%	-0.7525%	-0.7816%	-0.2164%	1.2769%	-1.2955%	0.4389%	-1.4360%	0.1905%	-0.1855%	-0.0710%
Variance	0.2703%	1.3022%	0.5005%	0.4719%	0.6608%	0.9559%	0.2603%	0.8903%	0.2848%	0.5415%	0.1391%
Standard deviation	5.1990%	11.4112%	7.0747%	6.8692%	8.1289%	9.7771%	5.1019%	9.4355%	5.3363%	7.3585%	3.7298%
Beta	0.4755	1.6528	1.0369	1.1451	0.9749	1.3961	0.7123	1.5693	0.4809	1.2841	1.0000

Question 2(a)If you are asked to construct your own portfolio by using information about the individual stocks in the excel spreadsheet, are there any stocks which you should not include in your portfolio? Can you provide your justifications? (You may draw performance graphs of one stock against the market portfolio).

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