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  • Session 12 MVP: 0.5143 or 0.51 0.4857 or 0.49

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    Vineetha Chowdary Gude
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    This document discusses two examples of calculating the minimum variance portfolio (MVP) for two securities. In the first example, the MVP has weights of 51% for the first security and 49% for the second, with an expected return of -0.5744 and portfolio variance of 50.9189. In the second example, the MVP has weights of 15% for the first security and 85% for the second, with an expected return of 0.20596 and portfolio variance of 42.05. The document shows the calculations for determining the weights, expected return, and variance of the MVP in both examples.

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    Session 12

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    This document discusses two examples of calculating the minimum variance portfolio (MVP) for two securities. In the first example, the MVP has weights of 51% for the first security and 49% for the second, with an expected return of -0.5744 and portfolio variance of 50.9189. In the second example, the MVP has weights of 15% for the first security and 85% for the second, with an expected return of 0.20596 and portfolio variance of 42.05. The document shows the calculations for determining the weights, expected return, and variance of the MVP in both examples.

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    9 views2 pages

    Session 12 MVP: 0.5143 or 0.51 0.4857 or 0.49

    Uploaded by

    Vineetha Chowdary Gude
    This document discusses two examples of calculating the minimum variance portfolio (MVP) for two securities. In the first example, the MVP has weights of 51% for the first security and 49% for the second, with an expected return of -0.5744 and portfolio variance of 50.9189. In the second example, the MVP has weights of 15% for the first security and 85% for the second, with an expected return of 0.20596 and portfolio variance of 42.05. The document shows the calculations for determining the weights, expected return, and variance of the MVP in both examples.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Session 12

    MVP

    Example 1

    S1 S2
    mean -2.26 1.18
    variance 103.16 109.48
    SD 10.16 10.46
    Covarianc
    e -4.40
    Correlatio
    n -0.04

    W1 = (109.48-(-4.40)/(103.16+109.48-(2*-4.40)

    = 0.5143 or 0.51

    W2 = 1-W1 = 1-0.5143 = 0.4857 or 0.49

    Expected return = (0.51 x-2.26)+(0.49 x 1.18) = -0.5744

    Portfolio variance = (0.51^2 x 103.16)+(0.49^2 x 109.48)+(2 x 0.51 x 0.49 x -4.40)

    =50.9189

    Portfolio SD = 7.135
    Example 2

    S1 S2
    Mean -1.18 0.46
    Variance 182.01 46.75
    SD 13.49 6.84
    Covarianc
    e 16.39
    Correlatio
    n 0.18
    W1 = (46.75 – 16.39)/(182.01 + 46.75 –(2x16.39)

    = 0.1549 or 15%

    W2 = 1-0.1549

    = 0.8451 or 85%

    Expected return = (0.15 x -1.18)+(0.85 x 0.46) = 0.20596

    Portfolio variance = (0.15^2 x 182.01)+(0.85^2 x 46.75)+(2x0.15 x 0.85x16.39)

    = 42.05

    SD= 6.48

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