portfolio possibility curve


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How to draw portfolio possibility curve for three stock… Attached a file which has the graph of portfolio possibility curve for 3 years in page no: 9 Document Preview: Enhancing the Teaching of Statistics: Portfolio Theory, an Application of Statistics in Finance Nicolas Christou University of California, Los Angeles Journal of Statistics Education Volume 16, Number 3 (2008), www.amstat.org/publications/jse/v16n3/christou.html Copyright © 2008 by Nicolas Christou all rights reserved. This text may be freely shared among individuals, but it may not be republished in any medium without express written consent from the authors and advance notification of the editor. Key Words: Efficient frontier; Covariance; Portfolio risk and return; Stock market. Abstract In this paper we present an application of statistics using real stock market data. Most, if not all, students have some familiarity with the stock market (or at least they have heard about it) and therefore can understand the problem easily. It is the real data analysis that students find interesting. Here we explore the building of efficient portfolios through optimization using examples of two and three stocks, and how covariance and correlation can help the investor to diversify his or her risk. We discuss why diversification works, but also the problems that arise in portfolio management. Stock market data can be incorporated at any level of statistics, from lower division, to upper division, to graduate courses of Mathematics and Statistics. From our experience, students find this topic very interesting and often they want to enroll in other courses related to this area. 1. Introduction When we teach our courses we often ask ourselves “I need to find a nice real data set to show my students why what we teach is useful and applicable.” In addition, the latest recommendations of many international pedagogical resources in probability and statistics (e.g., SurfStat (SurfStat), the Chance Project (ChanceProject), GAISE Report (GAISEReport), ASA (ASA), USCOTS (USCOTS), ARTIST (ARTIST), IASE, etc.) suggest that undergraduate students enrolled in probability and statistics courses… Attachments: 2.pdf

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