Beta Management Company: Case Study Month
Van- Index
Calif-REIT
Brown
89,1 89,2 89,3 89,4 89,5 89,6 89,7 89,8 89,9 89,10 89,11 89,12 90,1 90,2 90,3 90,4 90,5 90,6 90,7 90,8 90,9 90,10 90,11 90,12
7.32 -2.47 2.26 5.18 4.04 -0.59 9.01 1.86 -0.4 -2.34 2.04 2.38 -6.72 1.27 2.61 -2.5 9.69 -0.69 -0.32 -9.03 -4.89 -0.41 6.44 2.72
-28.26 -3.03 8.75 -1.47 -1.49 -9.09 10.67 -9.38 10.34 -14.38 -14.81 -4.35 -5.45 5 9.52 -0.87 0 4.55 3.48 0 -13.04 0 1.5 -2.56
9.16 0.73 -0.29 2.21 -1.08 -0.65 2.22 0 1.88 -7.55 -12.84 -1.7 -15.21 7.61 1.11 -0.51 12.71 3.32 3.17 -14.72 -1.91 -12.5 17.26 -8.53
1.1025 4.606343688
-2. -2.265416667 9.230735982
Mean St.De .Dev
20 15 10 5 0 -5 -10 -15 -20 -25 -30
-0. -0.67125 <-- Monthly Mean 8.166771121 <-- Monthly St.dev
rho(1,2)= rho(1,3)= rho(2,3)= <-- Coefficients of correlation 0.07 0.0735 3531 3166 66 0.65 0.6561 6169 6976 766 6 0.16 0.1638 3876 7655 55 2.9962 2.9962885 88542 42
23.655 23.655903 90313 13
<-- Covariance of REIT and Brown with Vanguard respectively.
beta(ReiT) beta(Brown) 0.14121179 1.114876744 E(r-vang)= E(r-reit)= E(r-bn)= stdev(r-vang)= stdev(r-reit)= stdev(r-bn)=
14.06% -24.04% -7.76%
<-- Convert monthly return to effective annual rate
15.96% 31.98% 28.29%
<-- Convert monthly st.dev to annual st.dev
Required rate: (CAPM), on annual rate basis Reit 8.00% Brown 14.87%
<-- Assuming Vanguard Index is a proxy of the market portfolio. Riskfree rate is assumed to be 7%.
Van- Index Calif-REIT Brown
Investment Return Data 20
) 10 % 0 ( n -10 r u -20 t e -30 R
1 4 7 0 1 4 7 0 , , , , , , 1 1 9 9 9 , 0 0 0 , 8 8 8 9 9 9 9 0 8 9
-40
Date
Investment Return Data 20
) 10 % 0 ( n r -10 u -20 t e -30 R
Series1 1 4 7 0 1 4 7 0 , , , , , , 1 1 9 9 9 , 0 0 0 , 8 8 8 9 9 9 9 0 8 9
Index
-40
Date
Series2 Series3
