Standard deviation of returns is often used as a measure of a mutual fund's volatility (risk). A larger standard deviation of returns is anindication of higher risk. According to Morningstar.com (June 17, 2010), the American Century Equity Income Institutional Fund, a largecap fund, has a standard deviation of returns equal to 13.68 percent. Morningstar.com also reported that the Fidelity Small CapDiscovery Fund has a standard deviation of returns equal to 2779 percent Each standard deviation was computed using a sample ofsize 31(a) Calculate the value of the test statistic. (Do not round Intermediate calculations. Round your answer to 2 decimal places.)Test statistic(b) Calculate the critical value by using excel (Round your answer to 2 decimal places.)Critical value(c) At the 01 significance level, what it the conclusion?O RejectO Fall to reject

F testIt is used to compare statistical models. It is fitted to the data set, to identify the model…

Answered: Standard deviation of returns is often…

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018

18th Edition

ISBN:9780079039897

Author:Carter

Publisher:Carter

Chapter10: Statistics

Section: Chapter Questions

Problem 8SGR

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Vanguard's Precious Metals and Mining fund (Metals) and Fidelity's Strategic Income fund (Income) were two top-performing mutuals funds for the years 2000 through 2009. An analysis of annual return data for these two funds provided important information for anytype of investor. Over the past 10 years, the Metals fund posted a mean return of 24.65% with a standard deviation of 37.13%. On the other hand, the mean and the standard deviation of return for the Income fund were 8.51% and 11.07%, repectively. It is reasonable to assume that the returns of the Metals and the Income funds are both normally distributed, where the means and the standard deviations are derived from the 10-year sample period. In a report, use the sample information to compare and contrast the Metals and Income funds from the perspective of an investor whose objective is to 1. Minimize the probability of earning a negative return. 2. Maximize the probability of earning a return between 0% and 10%. 3. Maximize the…
You may need to use the appropriate technology to answer this question. Investors commonly use the standard deviation of the monthly percentage return for a mutual fund as a measure of the risk for the fund; in such cases, a fund that has a larger standard deviation is considered more risky than a fund with a lower standard deviation. The standard deviation for a certain fund, referred to as Fund A, and the standard deviation for a second fund, Fund B, were recently reported to be 14.0% and 18.9%, respectively. Assume that each of these standard deviations is based on a sample of 60 months of returns. Do the sample results support the conclusion that the Fund B has a larger population variance than Fund A? (Assume that ? = 0.05.) State the null and alternative hypotheses. H0: ?12 ≤ ?22 Ha: ?12 > ?22 H0: ?12 = ?22 Ha: ?12 ≠ ?22 H0: ?12 > ?22 Ha: ?12 ≤ ?22 H0: ?12 ≠ ?22 Ha: ?12 = ?22 Find the value of the test statistic. Find the p-value. (Round your answer to four…
One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Although the standard deviation is easy to compute, it does not take into account the extent to which the price of a given stock varies as a function of a standard market index, such as the S&P 500. As a result, many financial analysts prefer to use another measure of risk referred to as beta. Betas for individual stocks are determined by simple linear regression. The dependent variable is the total return for the stock and the independent variable is the total return for the stock market. For this case problem we will use the S&P 500 index as the measure of the total return for the stock market, and an estimated regression equation will be developed using monthly data. The beta for the stock is the slope of the estimated regression equation (b1). The data contained in the file named Beta provides the…
One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Although the standard deviation is easy to compute, it does not take into account the extent to which the price of a given stock varies as a function of a standard market index, such as the S&P 500. As a result, many financial analysts prefer to use another measure of risk referred to as beta. Betas for individual stocks are determined by simple linear regression. The dependent variable is the total return for the stock and the independent variable is the total return for the stock market. For this case problem we will use the S&P 500 index as the measure of the total return for the stock market, and an estimated regression equation will be developed using monthly data. The beta for the stock is the slope of the estimated regression equation The value of beta for the stock market will always be 1; thus,…
(b) Determine the mean and median rate of return for each sector. Which sector has the higher mean rate of return? Which sector has the higher median rate of return? xconsumer cyclical = Mconsumer cyclicsl = Xindustrial = Mindustrial = (c) Determine the standard deviation rate of return for each sector. In finance, the standard deviation rate of return is called risk. Typically, an investor "pays" for a higher return by accepting more risk. Is the investor paying for higher returns for these sectors? Sconsumer cyclical = sindustrial =
Suppose portfolio mean return is 25% and standard deviation 30%. Find the 2 standard deviation range. Now you wish to estimate the portfolio's fifth-percentile VaR (the value below which lie 5% of the returns). Will the 5% VaR be greater or less than -30%? Please show your work:
J.P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected return for the S&P 500 was 5.04% with a standard deviation of 19.45% and the expected return over that same period for a core bonds fund was 5.78% with a standard deviation of 2.13%.† The publication also reported that the correlation between the S&P 500 and core bonds is −0.32. J.P. Morgan Asset Management also reported that the expected return for real estate investment trusts (REITs) was 13.07% with a standard deviation of 23.17%. The correlation between the S&P 500 and REITs is 0.74 and the correlation between core bonds and REITs is −0.04. (Past performance is no guarantee of future results.) You are considering portfolio investments that are composed of an S&P 500 index fund and REITs as well as portfolio investments composed of a core bonds fund and REITs. (a) Using the information provided, determine the covariance between the S&P 500…
Risk taking is an important part of investing. In order to make suitable investment decisions on behalf of their customers, portfolio managers give a questionnaire to new customers to measure their desire to take financial risks. The scores on the questionnaire are approximately normally distributed with a mean of 49 and a standard deviation of 15 The customers with scores in the bottom 5% are described as "risk averse." What is the questionnaire score that separates customers who are considered risk averse from those who are not? Carry your intermediate computations to at least four decimal places. Round your answer to one decimal place.
Standard deviation of returns is often used as a measure of a mutual fund’s volatility (risk). A larger standard deviation of returns is an indication of higher risk. According to Morningstar.com (June 17, 2010), the American Century Equity Income Institutional Fund, a large cap fund, has a standard deviation of returns equal to 14.11 percent. Morningstar.com also reported that the Fidelity Small Cap Discovery Fund has a standard deviation of returns equal to 28.44 percent. Each standard deviation was computed using a sample of size 36. (a) Calculate the value of the test statistic. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Test statistic what is the test statistic?
Risk taking is an important part of investing. In order to make suitable investment decisions on behalf of their customers, portfolio managers give a questionnaire to new customers to measure their desire to take financial risks. The scores on the questionnaire are approximately normally distributed with a mean of 50.5 and a standard deviation of 16. The customers with scores in the bottom 5% are described as "risk averse. What is the questionnaire score that separates customers who are considered risk averse from those who ar not? Carry your intermediate computations to at least four decimal places. Round your answer to one decimal place. U Continue X S Submit Terms of Use | Privacy Center
A group of domestic equity mutual funds had a mean return of 6.2% with a standard deviation of 1.8%. The distribution of returns for mutual funds is normal. Find the cutoff return values that would separate the Lowest 16%, Middle 95% and Highest 2.5%
J.P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected return for a core bonds fund was 5.78% with a standard deviation of 2.13%.† J.P. Morgan Asset Management also reported that the expected return for real estate investment trusts (REITs) was 13.07% with a standard deviation of 23.17%. The correlation between core bonds and REITs is −0.04. (Past performance is no guarantee of future results.) You are considering portfolio investments that are composed of a core bonds fund and REITs. a. Using the information provided, determine the covariance between core bonds and REITs. (Round your answers to three decimal places.) covariance = b. Construct a portfolio that is 50% invested in a core bonds fund and 50% invested in REITs. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.) expected return = standard deviation =…

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