EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 12, Problem 15PS
Summary Introduction
To identify:
The primary trends of DJAI market of few months and see whether it on upward trend or downward trend.
Introduction:
DJIA: Dow Jones Industrial Average (DJIA) is a big security market indicator which provides all information and news about the performance in the specific security market. It is a three trend market.
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Students have asked these similar questions
The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period.
Month
Madison Cookies
Sophie Electric
1
-0.04
0.07
2
0.06
-0.02
3
-0.07
-0.10
4
0.12
0.15
5
-0.02
-0.06
6
0.05
0.02
Compute the following:
a) Average monthly rate of return for each stock
b) Standard deviation of returns for each stock
c) Covariance between the rates of returns
d) The correlation coefficient between the rates of return
e) What level of correlation would you have expected before performing your calculations?
f) How did your expectations compare with the computed correlation?
g) Would these two stocks be good choices for diversification? Why or why not?
Consider the following time series data:
a. Compute MSE using the most recent value as the forecast for the next period. Whatis the forecast for month 8?b. Compute MSE using the average of all the data available as the forecast for the nextperiod. What is the forecast for month 8?c. Which method appears to provide the better forecast?
Use the following output from a market model regression of the weekly percentage returns on the AIG commodities index on a market index to answer questions a. - f.
a. What is the formula for the Commodities Index' characteristic line?
b. You forecast a market return of 1.0% for next week. What is next week's expected return for the commodities index?
c. What is the correlation between the return on the commodities index and the return on the market Index?
d. How much of the variation in the commodities index's returns are explained by the model?
e. Based on these regression results, the commodities index would be considered what kind of an investment?
f. Does this regression have much explanatory power? Why or why not?
Chapter 12 Solutions
EBK INVESTMENTS
Ch. 12 - Prob. 1PSCh. 12 - Prob. 2PSCh. 12 - Prob. 3PSCh. 12 - Prob. 4PSCh. 12 - Prob. 5PSCh. 12 - Prob. 6PSCh. 12 - Prob. 7PSCh. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Prob. 11PSCh. 12 - Prob. 12PSCh. 12 - Prob. 13PSCh. 12 - Prob. 14PSCh. 12 - Prob. 15PSCh. 12 - Prob. 16PSCh. 12 - Prob. 17PSCh. 12 - Prob. 18PSCh. 12 - Prob. 19PSCh. 12 - Prob. 20PSCh. 12 - Prob. 21PSCh. 12 - Prob. 22PSCh. 12 - Prob. 23PSCh. 12 - Prob. 24PSCh. 12 - Prob. 25PSCh. 12 - Prob. 1CPCh. 12 - Prob. 2CPCh. 12 - Prob. 3CPCh. 12 - Prob. 4CPCh. 12 - Prob. 5CP
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