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?
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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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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