Arithmetic mean

Introduction Markowitz (1952, 1956) pioneered the development of a quantitative method that takes the diversification benefits of portfolio allocation into account. Modern portfolio theory is the result of his work on portfolio optimization. Ideally, in a mean-variance optimization model, the complete investment opportunity set, i.e. all assets, should be considered simultaneously. However, in practice, most investors distinguish between different asset classes within their portfolio-allocation frameworks

THE BOEING 7E7 Teaching Note Synopsis and Objectives In 2003, the Boeing Company announced plans to build a new “super-efficient” commercial jet called the “7E7” or “Dreamliner.” This was a “bet the farm” gamble by Boeing, similar in magnitude to its earlier introductions of the 747 and 777 airliners. The technological superiority of the new airframe, as well as the fact that it would penetrate a rapidly growing market segment, were arguments for approval of the project. On the other hand, the

Question 1 Why is Boeing contemplating the launch of the 7E7 project? Is this a good time to do so? We can see from the case study that Boeing and Airbus in 2002 dominated the large plane market. Whilst it was in competition with Airbus, Boeing was falling behind and in 2002 Airbus was set to launch the A380 set to be the largest passenger aircraft ever built. The demand for commercial aircrafts of this size was positive. Boeing’s investment into the future through research and development could

Introduction and background We are conducting an analysis of Marriott Corporation for calculating the hurdle rates at each of the firm 's three divisions--lodging division, restaurant division and contract service division. Marriott uses Weighted Average Cost of Capital (WACC) as the hurdle rate, and use it to discount the appropriate cash flows when evaluate an investment project. Our goal is to determine the WACC at every division base on the information that the case has provided. First

Anecdotal evidence can be defined as non-scientific reports or observations that may be based on hearsay rather than hard facts. For example, anecdotal evidence can come in the form of stories people tell or say but it is not known whether or not it can truly be trusted. Bias – distinguish the following: Confirmation bias is defined as a type of bias that involves favoring information that confirms one’s preconceptions, existing beliefs, or biases. Take for example a person who holds a belief that

20-year  KRF= 5.74% According to Joana Cohen, she got risk premium = 5.90% (in Exhibit 4: geometric mean = 5.90%, arithmetic mean = 7.50%) Because of arithmetic mean is better for one-year period estimated expected returns, while geometric mean is better for long-term period valuation. So, for long life valuation, we can find stable valuation (Jacquier et al., 2003). That’s the answer for Joana Cohen choses geometric mean for her calculated. Joanna Cohen calculated: KE = 5.74%  +  5.90% x 0.80                         

4.50% 0.47 1 Coefficient of variation is the measure of variability of the data. If the CV is higher it means the risk is higher, when the CV is lower it means less risk and high stability. From the table above the less riskier is Real Estate Category, Common Stocks are at the highest risk. c). Assume the arithmetic mean returns in these series are normally distributed. Calculate the range of returns that an investor would have expected

at what level of measurement? d. Experimental 2. What was the mean posttest empowerment score for the control group? The mean posttest empowerment score for the control group was 97.12 3. Compare the mean baseline and posttest depression scores of the experimental group. Was this an expected finding? Provide a rationale for your answer. The mean baseline depression score of the experimental group is 14.00. The mean posttest depression score of the experimental group is 13.36. The posttest

The Capital Assets Price Model (CAPM), is a model for pricing an individual security or a portfolio. Its basic function is to describe the relationship between risk and expected return, which is often used to estimate a cost of equity (Wikipedia, 2009). It serves as a model for determining the discount rate which is used in calculating net present value. The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. The formula is:

can use the data form the following table:           Arithmetic average    Geometric Average        Stocks ‐  Stocks ‐  Stocks ‐  Stocks ‐  Historical Period  T.Bills    T.Bonds  T.Bills    T.Bonds  1928‐2004    7.92%    6.53%    6.02%    4.84%  1964‐2004    5.82%    4.34%    4.59%    3.47%  1994‐2004    8.60%    5.82%    6.85%    4.51%    For a long‐term investor the geometric average with treasury bonds (4.84%) is used.  For a short‐term investor the arithmetic average with treasury bills (7.92%) is used