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  • MIT18 S096F13 ETF Pridb 15

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    The document analyzes sector exchange-traded funds (ETFs) from 2003-2006. It shows: 1) Their annualized returns and volatility, with Energy and Utilities having the highest return but above-average volatility. 2) Their optimal allocations across different target returns, with Materials and Health Care preferred at lower targets and Energy at higher targets. 3) Their positions on the efficient frontier, with Energy and Utilities providing the highest return for a given risk. 4) A target portfolio aiming for 10% annual volatility allocating most to Utilities and Technology.

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    finance mathematics

    Original Title

    MIT18_S096F13_ETF_pridB_15

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    The document analyzes sector exchange-traded funds (ETFs) from 2003-2006. It shows: 1) Their annualized returns and volatility, with Energy and Utilities having the highest return but above-average volatility. 2) Their optimal allocations across different target returns, with Materials and Health Care preferred at lower targets and Energy at higher targets. 3) Their positions on the efficient frontier, with Energy and Utilities providing the highest return for a given risk. 4) A target portfolio aiming for 10% annual volatility allocating most to Utilities and Technology.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    5 views8 pages

    MIT18 S096F13 ETF Pridb 15

    Uploaded by

    AyatRashad
    The document analyzes sector exchange-traded funds (ETFs) from 2003-2006. It shows: 1) Their annualized returns and volatility, with Energy and Utilities having the highest return but above-average volatility. 2) Their optimal allocations across different target returns, with Materials and Health Care preferred at lower targets and Energy at higher targets. 3) Their positions on the efficient frontier, with Energy and Utilities providing the highest return for a given risk. 4) A target portfolio aiming for 10% annual volatility allocating most to Utilities and Technology.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 8

    Sector ETFS (Period: 20032006)

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    MATERIALS(XLB)
    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    UTILITIES(XLU)
    riskfree

    50

    100
    Time

    150

    200

    1. Risk vs Return (Annualized)


    Sector ETFS (Period: 20032006)
    ENERGY(XLE)

    0.20

    0.25

    UTILITIES(XLU)

    MATERIALS(XLB)

    0.15

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)

    CONSDISC(XLY)

    Return

    TECHNOLOGY(XLK)

    0.10

    CONSSTAPLES(XLP)

    HEALTH CARE(XLV)

    0.00

    0.05

    riskfree

    0.00

    0.05

    0.10
    Volatility

    0.15

    0.20

    1.0

    2. Optimal Allocations by Target Return Index


    Sector ETFS (Period: 20032006)

    0.0

    0.2

    0.4

    0.6

    0.8

    MATERIALS(XLB)
    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    UTILITIES(XLU)
    riskfree

    20

    40

    60
    Target Return Index

    80

    100

    riskfree
    UTILITIES(XLU)
    TECHNOLOGY(XLK)
    INDUSTRIALS(XLI)
    FINANCIAL(XLF)
    ENERGY(XLE)
    CONSDISC(XLY)
    CONSSTAPLES(XLP)
    HEALTH CARE(XLV)
    MATERIALS(XLB)

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    3. Optimal Allocations by Target Return Index


    Sector ETFS (Period: 20032006)

    Target Return Index

    4. Risk vs Return (Annualized)


    Sector ETFS (Period: 20032006)
    Efficient Frontier
    ENERGY(XLE)

    0.20

    0.25

    UTILITIES(XLU)

    MATERIALS(XLB)

    0.15

    CONSDISC(XLY)

    TECHNOLOGY(XLK)

    0.10

    CONSSTAPLES(XLP)

    HEALTH CARE(XLV)

    0.05

    0.00

    Return (Ann.)

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)

    riskfree

    0.00

    0.05

    0.10
    Risk (Ann. Volatility)

    0.15

    0.20

    5. Risk vs Return (Annualized)


    Sector ETFS (Period: 20032006)
    Efficient Frontier and Target Portfolio
    ENERGY(XLE)

    0.20

    0.25

    UTILITIES(XLU)

    MATERIALS(XLB)

    0.15

    CONSDISC(XLY)

    TECHNOLOGY(XLK)

    0.10

    CONSSTAPLES(XLP)

    HEALTH CARE(XLV)

    0.05

    0.00

    Return (Ann.)

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)

    riskfree

    0.00

    0.05

    0.10
    Risk (Ann. Volatility)

    0.15

    0.20

    6. Sector ETFS (Period: 20032006)


    Opt. Portfolio (TargetVol 10 Pct)

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    MATERIALS(XLB)
    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    UTILITIES(XLU)
    riskfree

    50

    100
    Time

    150

    200

    MIT OpenCourseWare
    http://ocw.mit.edu

    18.S096 Topics in Mathematics with Applications in Finance


    Fall 2013

    For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.

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