单选题
An analyst gathers the following data about the returns for three stocks.
|
|
Stock A
|
Stock B
|
Stock C
|
|
E(R)
|
0.04
|
0.09
|
0.11
|
|
σ
2
|
0.0025
|
0.0064
|
0.0081
|
Cov
AB
= 0.001, ρ
BC
= 0.60
The correlation coefficient between the returns of Stock A and Stock B ( ρ
AB
) and the covariance between the returns of Stock B and C (Cov
BC
) are closest to:
ρ
AB
Cov
BC
①A. 0.01 0.002
②B. 0.01 0.004
③C. 0.25 0.004
A. ①B. ②C. ③
【正确答案】
C
【答案解析】The formulas for computing the correlation coefficient and covariance between the two stocks are:
ρ
AB
=Cov
AB
/(σ
A
)＜σ
B
) =0.001 /(0.05×0.08) =0.25
Cov
BC
= ρ
BC
×σ
B
×σ
C
= 0.60 × 0.08 × 0.09 = 0.0043
Note that both formulas use the standard deviation, not the variance, of each stock.