I want to know how to do the work. Please don\'t use excel. I would like to know

Question

I want to know how to do the work. Please don't use excel. I would like to know the work behind it.

2. The following data was downloaded from Professor Kenneth French's website. The table shows the annual return of the U.S. stock market including NYSE, NASDAQ and Amex over the last 10 years.(15pts) Year Return (%) -16.97-15.12-22.47 32.12 11.82 4.34 11.4 2.63-39.96 31.58 a. What would be your expected return of the stock market in 2010 based on the table? (4pts) 2000 2001 2002 2003 2004 2005 2006 2007 20082009 b. What would be your expected standard deviation of return in 2010? (4pts) C. The average T-bill rate was 2.77% annually over the last 10 years, what would be the Sharpe ratio of the U.S. stock market? (3pts) what would be the 10% value at risk if the return follows a normal distribution? (2pts) Explain the meaning of your answer to question d. (2pts) d, e.

Explanation / Answer

Expected return, Mean=Sum of all returns/number of returns=(-16.97-15.12-22.47+32.12+11.82+4.34+11.4+2.63-39.96+31.58)/10=-0.063%

Standard Deviation=Sum((Return-Mean)^2)/number of returns=squareroot(((-16.97-(-0.063))^2+(-15.12-(-0.063))^2+(-22.47-(-0.063))^2+(32.12-(-0.063))^2+(11.82-(-0.063))^2+(4.34-(-0.063))^2+(11.4-(-0.063))^2+(2.63-(-0.063))^2+(-39.96-(-0.063))^2+(31.58-(-0.063))^2)/10)=22.23%

Sharpe ratio=(portfolio return-risk free)/standard devaition of portfolio=(-0.063-2.77)/22.23=-0.12744

Var=-0.263-1.282*22.23=-28.76%

It means that in 90% of the cases, the minimum return in 90% of the cases is -28.76% or returns would be more than -28.76% or in worst 10% of the cases, the return would be less than -28.76%..

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