Gary2584
New Member
Hi Suzanne,
I have a few queries on the MVP and Efficient frontier concept, currently i am working on the Chapter 3: Delineating Efficient portfolios, I have gone through David's slides and GARP readings, but towards the end of the chapter from the readings; the author gives 3 examples with regard to the MVP. I have a few questions with regard to the formulas the author has used to calculate the "Fraction of the portfolio held in S&P" or X(S&P)
1. The formula used to calculate X(s&p), is the same as we used to calculate when p=0; given in the previous section of the chapter. I dont understand why that correlation assumption has been used, because as per my understanding of the example there is a relationship between the return on the assets.
2. After we have calculated the MVP as -0.51 (in the first example given towards the end of the chapter); how do we calculate the Standard deviation. I tried doing it with the formula given in the Correlation cases assuming p=0 but got even more confused. The S.D is given in the book as 4.75%, am not sure on how to calculate this figure.
3. I was not able to understand how we determine the correlation between the two assets given to us, as in which formula to use for the calculation out of the 4 cases given in the GARP reading.
I know my queries are little vague but am stuck on these 2 concepts since yesterday.
Please advise.
Thanks,
Gary
I have a few queries on the MVP and Efficient frontier concept, currently i am working on the Chapter 3: Delineating Efficient portfolios, I have gone through David's slides and GARP readings, but towards the end of the chapter from the readings; the author gives 3 examples with regard to the MVP. I have a few questions with regard to the formulas the author has used to calculate the "Fraction of the portfolio held in S&P" or X(S&P)
1. The formula used to calculate X(s&p), is the same as we used to calculate when p=0; given in the previous section of the chapter. I dont understand why that correlation assumption has been used, because as per my understanding of the example there is a relationship between the return on the assets.
2. After we have calculated the MVP as -0.51 (in the first example given towards the end of the chapter); how do we calculate the Standard deviation. I tried doing it with the formula given in the Correlation cases assuming p=0 but got even more confused. The S.D is given in the book as 4.75%, am not sure on how to calculate this figure.
3. I was not able to understand how we determine the correlation between the two assets given to us, as in which formula to use for the calculation out of the 4 cases given in the GARP reading.
I know my queries are little vague but am stuck on these 2 concepts since yesterday.
Please advise.
Thanks,
Gary
