Business Studies Essay

Analysis of Portfolios

            The stock portfolio results provide the arithmetic mean, standard deviation and variance of each category. In the two bond portfolios of government bonds and corporate bonds, the average has been used to determine the mean returns generated by the bonds. The two bonds have a positive mean of 0.0046 and 0.0047. It is an indication that the bonds earned the investors returns on their investment. The mean of the T-Bills is also positive and indication that it had a positive return on investment. The stock index was categorized into small, medium, and large. The mean of all categories is positive thus indicating that the investors had a positive return on investment. The value weighted portfolio of all the stocks also had a positive mean. It indicates the less risk associated with stock portfolios mainly due to their government backing.

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            The standard deviation of the stock index, bonds, and the T-Bills is used to indicate relative risk. It represents the relation of price fluctuation in the market in relation to a base index. The measure of risk is related to the rate of retune of the investment. The three stock portfolios exhibit standard deviation with the stock index indicating the highest results of standard deviation of 0.0854, 0.0613, and 0.0431. The lowest standard deviation is reflected by T-Bill at 0.0026. It indicates that the T-Bills have less risk of fluctuation in relation to a base index.

            Variance has been used to indicate the rates of dispersion of the three stock portfolios. Corporate bonds have the lowest rate of dispersion (0.0004), an indication that investing in them guarantees a return almost similar to the determined base index. Small return on stock index has the highest rate of dispersion (0.0073) thus indicating the high risk of fluctuation in the returns in relation to base index. The weighted variance is at 0.002, an indicator of the minimal risk of fluctuation. In overall, the results of the analysis indicate small differences in expected returns in relation to base index thus in line with my intuition that the three stock portfolios have low risks in terms of returns.

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