Funds Management and Portfolio Selection

PART 1

The information is submitted in the table 1

YEAR J-FUND BETA J-FUND RETURN ) S

500 RETURN ) T-BILL RETURN

1969 0 ,9 -2 ,99 -8 ,5 6 ,58

1970 0 ,95 0 ,63 4 ,01 6 ,53

1971 0 ,95 22 ,01 14 ,31 4 ,39

1972 1 24 ,08 18 ,98 3 ,84

1973 1 -22 ,46 -14 ,66 6 ,93

1974 0 ,9 -25 ,12 -26 ,47 8

1975 0 ,8 29 ,72 37 ,2 5 ,8

1976 0 ,75 2 ,15 23 ,84 5 ,08

p 1977 0 ,8 0 ,48 -7 ,18 5 ,12

1978 0 ,85 6 ,85 6 ,56 7 ,18

table 1

Average beta for 10 years is equaled to the sum beta for 10 years and to divide on 10 . thus average meaning of this factor for 10 years equally 0 ,89

With the help of market model we shall display interrelation of the given table No1

E (J-Fund E (T-Bill b (J-Fund E (S

500 e (1

Where

E (J-Fund ) - profitableness of the securities J-Fund for the given period

E (S

500 ) - profitableness on a market index S

500 for the same period

E (T-Bill ) - profitableness on a market index T-Bill for the same period

b (J-Fund ) - factor of an inclination

e - casual error

Let 's count annual proportions S

500 and T-Bill for reception average beta for ten years . Let part S

500 x , then a part T-Bill 1- x From here we express meaning of unknown variable . The results are given in the table 2

x 1-x

1969 0 ,68 0 ,32

1970 1 ,99 -0 ,99

1971 2 ,11 -1 ,11

1972 1 ,55 -0 ,55

1973 1 ,47 -0 ,47

1974 1 ,05 -0 ,05

1975 0 ,88 0 ,12

1976 -0 ,18 1 ,18

1977 0 ,40 0 ,60

1978 0 ,25 0 ,75

table 2

Let 's substitute in the formula (1 ) new proportions , and we shall find new meanings E (J-Fund . The results are submitted in the table 3

J-FUND BETA

1969 -3 ,048

1970 1 ,109

1971 23 ,823

1972 27 ,318

1973 -24 ,832

1974 -25 ,398

1975 26 ,787

1976 2 ,756

1977 0 ,740

1978 6 ,785

table 3

Let 's calculate proportions S

500 and T-Bill , in which were initially The results are submitted in the table 4

x 1-x

1969 0 ,67 0 ,33

1970 2 ,17 -1 ,17

1971 1 ,91 -0 ,91

1972 1 ,34 -0 ,34

1973 1 ,36 -0 ,36

1974 1 ,04 -0 ,04

1975 1 ,00 0 ,00

1976 -0 ,23 1 ,23

1977 0 ,43 0 ,57

1978 0 ,21 0 ,79

table 4

Comparison of proportions S

500 and T-Bill and their changes are displayed on the diagrams The final comparison profitableness of the actions J-Fund at average beta (for 10 years ) and real beta is visible on the following diagram that testifies to essential deviations and fluctuations...