Essay
Analysis of risk versus return for two investment cases
- Course
- Institution
Detailed analysis on the risk and return quantification for the California REIT versus Brown stock.
[Show more]
Seller
Follow
rodneymahlangu
Reviews received
Content preview
INVESTMENT ANALYSISCARLIFORNIA REIT AND BROWN GROUP
, Question 1
The variability (standard deviation) of the returns of California REIT, Brown Group and the
Vanguard Index 500 Trust were computed using the formula as shown below.
The results obtained are shown in the table below.
Stock California REIT Brown Group Vanguard 500
Standard Deviation (STD) 9.23% 8.17% 4.61%
The variability for California REIT is 9.23%, for Brown group it is 8.17%. Both these values
almost double the variability of the Vanguard 500 (STD of 4.61%). It is evident from the above
mentioned values that the California REIT stock appears to be the riskiest since it has the highest
value of standard deviation. Generally, in comparison to the Vanguard Index 500, both California
REIT and Brown Group are much more risky.
Question 2
The variability of each Portfolio, with 99% of funds invested in the Index fund and 1% in each
individual stock is calculate using the equation below.
σ2p=wi2σ2i + wj2σ2j + 2wiwjCov (ri, rj) = wi2σ2j + wi2σ2j + 2wiwjσiσjPij
Where; w = the portfolio weight of the stock
σ = standard deviation of the stock
Cov (ri, rj) = covariance of the two assets under consideration
Pij = correlation coefficient of the stocks under consideration
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller rodneymahlangu. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.59. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
62491 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now