www.federalreserve.gov

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4x=0
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www.federalreserve.gov

Postby 4x=0 » Sun Jul 08, 2007 4:22 am

I found this website today after searching for t bond yields in an effort to further optimize my discretionary exit strategy spreadsheet. i Got a little carried away and started downloading cvs files for AAA corporate bond annual yields. Open to say, corporate bonds have relatively small risk but their reward is horrible.

http://www.federalreserve.gov/releases/



Standard deviation (risk) of annual returns on AAA corporate bonds for 30 years is 2.37

My personal stdev is not far off...


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rrobin
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Postby rrobin » Sun Jul 08, 2007 1:46 pm

4x=0

Soon you will be clipping coupons @open along with pipping pips.

rr

4x=0
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Postby 4x=0 » Mon Jul 09, 2007 12:07 am

The federal funds rates over the last 50 years. I'm sure some of you kreslik members remember this well.


A decrease in the federal funds interest rate stimulates economic growth, but an excessively high level of economic activity can cause inflation pressures to build to a point that ultimately undermines the sustainability of an economic expansion. An increase in the federal funds interest rate will curb economic growth and help contain inflation pressures, and thus can promote the sustainability of an economic expansion, but too large an increase could retard economic growth too much.




4x=0
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Postby 4x=0 » Mon Jul 09, 2007 1:30 am

Higher average return and less risk*? I'll go with BAA Bonds



*risk calculated from 1976 on

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Postby 4x=0 » Tue Jul 17, 2007 3:20 pm

It's summer II now, I'm taking another finance class. (but this time the prof. is one of those sadistic ones). MARVELOUS!

Last semester I learned what Beta is, now I'm teaching myself how to calculate Beta. I'm sure some of you have seen the "Beta" metric on sites like finance.yahoo.com and also finance.google.com

Beta measures a specific stock sensitivity to the "market" aka the S&P500 or NASDAQ or whatever you choose.

If Kreslik.com stock (KLK) had a beta of 1, this would indicate that when the S&P500 is up 4% so is KLK. When the S&P is down 10% so is KLK and so on. If KLK beta was 2 then KLK would be up 8% when S&P is up 4%. Get it?

Beta is calculated by plotting a graph. Using a scatter plot with the market returns on the X axis and KLK returns on the Y axis, then draw a trend line ALSO KNOWN AS a regression line between the dots.

You then take the slope of that line and that is your BETA.

This can also be done with a financial calculator which is how I plan on doing this for the test tomorrow.

For example:


Market Returns: 4%, 5%, 6%, 5%, 4%

KLK Stock: 2%, 6%, 8%, 7%, 1%

Beta = .94 -- highly correlated

A beta of -1 would indicate the 2 stocks move exact opposite of each other, and is good when selecting several stocks for DIVERSIFICATION. You want the aggregate graph of the 2 assets to cancel each other out, yet be trending up.

Using the above returns as an example, return and risk are calculated:

The average return on both assets is 4.8% (i didn't plan that).

The standard deviation of market is .84

The standard deviation of KLK stock: 3.11


Most people would go with the lower risk asset, considering the returns are identical, rightfully so. But what if KLK had a higher return, and also a smaller standard deviation? Would you want to invest now in KLK stock??

Simply dividing he standard deviation by the expected return gives you THE COEFFICIENT OF VARIATION.

COV-MKT: .18 <--- much less risk per return

COV-KLK: .65


The worst part about a sadistic professor during summer school is that it's EVERY DAY for 5 weeks straight and once they know you know what they're doing (usually doesn't take long) most of your energy is not spent learning!

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