question archive Given n securities with Expected return vector p and Covariance matrix E, consider the Portfolio with Expected return p,(@) = p' w and variance o (w) = w Ew, where we R" is the vector of weights
Given n securities with Expected return vector p and Covariance matrix E, consider the Portfolio with Expected return p,(@) = p' w and variance o (w) = w Ew, where we R" is the vector of weights
Subject:StatisticsPrice: Bought3
Given n securities with Expected return vector p and Covariance matrix E, consider the Portfolio with Expected return p,(@) = p' w and variance o (w) = w Ew, where we R" is the vector of weights. We denote by e the column vector of R" with all entries equal to 1. . Using a Lagrangian approach, provide the analytical solution of WER Pp(w) subject to ew = 1 (3) (w) =07 . Now we take n = 2 and denote the optimal solution by w*(or) and the Lagrange multiplier for the risk constraint by Az(or). Assume that = (10%%) 5% and > = 1% -1% -1% and consider a grid of of in the range [2%, 30%%] by steps of 0.5%. 2 Plot the efficient frontier, namely the graph of the mapping or , p(w*(or)) (volatility ( on x-axis and expected return p on the y-axis ) Add to that figure the graph of the mapping or . > >g(or). How do you interpret 12? . Using a Lagrangian approach, provide the analytical solution of min WEK subject to ow = 1 (4) Pp() = PT and plot the efficient frontier. How does it compare to the efficient frontier from equation (3) and what is your conclusion?
