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Statistical Analysis Of Market Indexes

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The following are monthly percentage price changes for four market indexes

MONTH DJIA S&P500 RUSSELL2000 NIKKEI
1 0.03 0.02 0.04 0.04
2 0.07 0.06 0.1 -0.02
3 -0.02 -0.01 -0.04 0.07
4 0.01 0.03 0.03 0.02
5 0.05 0.04 0.11 0.02
6 -0.06 -0.04 -0.08 0.06

COMPUTE THE FOLLOWING

A - Average monthly rate of return for each index.

B - Standard deviation for each index

C - Covariance between the rates of return for the following indexes:
DIJA- s&p 500
S&P 500-Russel 2000
S&P 500-Nikkei
Russsel 2000-Nikkei

D - The correlation coefficients for the same four combinations.

E - Using the answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russel 2000 and (2) THE S&P and the Nikkei. Discuss the two portfolios.

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This solution discusses monthly percentage price change for four market indexes.

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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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