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bchadwick

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tT
发表于 2011-7-11 20:00 | 只看该作者

calculate expected returns for segmented market

expected, returns, market
Assuming market A is 60% integrated with global market, and it has 50% correlation with global market

so we
1. calculate its Expected return using 50% as correlation to get R1 (assuming full integrated)
2. calculate its Expected return using 1 as correlation to get R2 (assuming full segmented)

Then R1*06 + R2*0.4

Question: why correlation is 1 when assuming it is fully segmented?

<need a break>
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bpdulog

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2#
发表于 2011-7-11 20:00 | 只看该作者
hellscream Wrote:
-------------------------------------------------------

>
> Question: why correlation is 1 when assuming it is
> fully segmented?

Since it is segmented, it is being correlated to itself, since that is the only market is has exposure to. Therefore it is 1.

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nannan66

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3#
发表于 2011-7-11 20:00 | 只看该作者
idreesz Wrote:
-------------------------------------------------------
> hellscream Wrote:
> --------------------------------------------------
> -----
>
> >
> > Question: why correlation is 1 when assuming it
> is
> > fully segmented?
>
> Since it is segmented, it is being correlated to
> itself, since that is the only market is has
> exposure to. Therefore it is 1.

but in 2. calculate its Expected return using 1 as correlation to get R2 (assuming full segmented)
The Expected Return and SD for the market (or the Shape ratio for the market rather) are still using the global market numbers

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aidebaobao

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4#
发表于 2011-7-11 20:00 | 只看该作者
Segmented market correlation is 1 because the domestic market represents the entire market. I'm sure there's more to this, but not worth knowing why at this point. Just remember that correlation is one and its weight is 1 - integration with world markets.

NO EXCUSES

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