Kenny James, CFA, is calculating the covariance of his large cap mutual fund returns against the returns generated by intermediate government bonds over the past five years. The following information is provided; (Aa) is the annual return minus the mean return for the largecap mutual fund; (Bb) is the annual return minus the mean return for the intermediate government bonds:
(Aa) (Bb)
Year 1 23.4 4.2
Year 2 13.2 1.6
Year 3 10.4 4.8
Year 4 19.7 12.2
Year 5 27.2 4.7
The answer is 59.9. (239.6/4)
Why isn’t it 47.9? (239.6/5)作者: thecfawannabe 时间: 2013-4-10 23:49
Where does it say that? I always thought it was N作者: krause2 时间: 2013-4-10 23:49
Agree with daddybackstab, sample covariance (and variance) are calculated using N1. You find the definition in the first few pages in in the chapter Correlation and regression.
