LG 5 P8-18 Graphical derivation of beta A firm wishes to estimate graphically the betas for two assets, A and B. It has gathered the return data shown in the following table for the market portfolio and for both assets over the last 10 years, 2006-2015. Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Market portfolio 2 -13 -4 -8 16 10 15 Actual return 8 13 Asset A 11% 8 -4 3 0 19 14 18 12 17 Asset B 16% 11 -10 3 -3 30 22 29 19 26 a. On a set of "market return (x axis)-asset return (y axis)" axes, use the data given to draw the characteristic line for asset A and for asset B. b. Use the characteristic lines from part a to estimate the betas for assets A and B. c. Use the betas found in part b to comment on the relative risks of assets A and B.
LG 5 P8-18 Graphical derivation of beta A firm wishes to estimate graphically the betas for two assets, A and B. It has gathered the return data shown in the following table for the market portfolio and for both assets over the last 10 years, 2006-2015. Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Market portfolio 2 -13 -4 -8 16 10 15 Actual return 8 13 Asset A 11% 8 -4 3 0 19 14 18 12 17 Asset B 16% 11 -10 3 -3 30 22 29 19 26 a. On a set of "market return (x axis)-asset return (y axis)" axes, use the data given to draw the characteristic line for asset A and for asset B. b. Use the characteristic lines from part a to estimate the betas for assets A and B. c. Use the betas found in part b to comment on the relative risks of assets A and B.
MATLAB: An Introduction with Applications
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Transcribed Image Text:LG 5 P8-18 Graphical derivation of beta A firm wishes to estimate graphically the betas for two
assets, A and B. It has gathered the return data shown in the following table for the
market portfolio and for both assets over the last 10 years, 2006-2015.
Year
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Market portfolio
2
-13
-4
-8
16
10
15
Actual return
8
13
Asset A
11%
8
-4
3
0
19
14
18
12
17
Asset B
16%
11
-10
3
-3
30
22
29
19
26
a. On a set of "market return (x axis)-asset return (y axis)" axes, use the data given
to draw the characteristic line for asset A and for asset B.
b. Use the characteristic lines from part a to estimate the betas for assets A and B.
c. Use the betas found in part b to comment on the relative risks of assets A and B.
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