The returns for Ken and the Dow Jones Industrial Average (DIJA) for the past fiv

Question

The returns for Ken and the Dow Jones Industrial Average (DIJA) for the past five years are listed below:

Year Kenney DIJA

1 .12 .06

2 .15 .14

3 .04 .07

4 -.05 .00

5 .09 .13

What is the covariance between Ken and the DIJA? *remember when using historical data N-1 not N should be used in formulas.

For the calculation of covariance, use the table to calculate. Populate the first two columns with the data provided and find the expected return for each. Use the third and fourth columns to find the deviations from the expected returns, and the fifth column to calculate the product of the deviations. Finally use the sum of the product of deviations and the equation for covariance to calculate covariance. For the check, use the excel formula for covariance. Avoid hard coding numbers when you can link to a previously input. Print and attach to your problem set along with a sheet showing formulas (go to the formulas ribbon and click show formulas).  

Explanation / Answer

covariance = Sum of (K-mean)(D-mean)/ 5-1

year K D K-mean D-mean (K-mean)(D-mean) 1 0.12 0.06 0.05 -0.02 -0.001 2 0.15 0.14 0.08 0.06 0.0048 3 0.04 0.07 -0.03 -0.01 0.0003 4 -0.05 0 -0.12 -0.08 0.0096 5 0.09 0.13 0.02 0.05 0.001 mean 0.07 0.08 covariance 0.003675

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.