# For Problems 20–22, download the spreadsheet containing the data used to prepare Table 5.3, “Rates o

“Rates of return, 1926–2013,” from Connect.

20. Calculate the same subperiod means and standard deviations for small stocks as

Table 5.4 of the text provides for large stocks. (LO 5-2)

a. Have small stocks provided better reward-to-volatility (Sharpe) ratios than large stocks?

b. Do small stocks show a similar higher standard deviation in the earliest subperiod as

Table 5.4 documents for large stocks?

I know the instructions say to download the data used to prepare table 5.3. However, my professor did not give me access to the “connect” software, so I was wondering if the above questions could answered despite not having that info?

Thank you! TABLE 5.3 Statistics for asset-class index portfolios, 1926–2013 (annual rates in U.S. dollars, %) World Markets U.S. Markets Large Government Bonds Small Stocks Large Stocks U.S. Long-Term Treasuries Stocks 11.82 -54.27 (1937) 159.05 (1933) 9.88 -45.56 (1931) 54.56 (1933) 5.07 –13.82 (2009) 32.68 (1985) 8.01 37.29 -48.33 20.52 -31.96 – 11.51 A. Total Returns (%) Geometric average 8.24 5.37 Lowest return – 39.94 (1931) – 13.50 (1946) Highest return 70.81 (1933) 34.12 (1985) B. Risk (Measured Using Excess Returns) Standard deviation 18.89 8.44 Value at risk (VaR) 5% -25.88 – 10.67 C. Deviation from Normality* VaR assuming normality -22.54 -10.43 Actual VaR minus normal -3.34 -0.24 Skew -0.09 0.68 Kurtosis 1.08 1.39 D. Returns in Excess of One-Month T-Bill Rates Average excess return 6.32 2.16 Standard error 2.01 0.90 E. Sharpe Ratios for 1926–2013 and Three Subperiods Entire period 0.33 0.26 1926-1955 0.43 0.22 1956-1985 0.19 0.05 1986-2013 0.35 0.52 F. Correlations of Excess Returns With inflation -0.13 -0.27 With T-bill rates -0.25 -0.16 -36.96 -11.37 0.83 1.97 -23.51 -8.46 -0.31 -0.05 – 10.23 – 1.28 0.39 0.53 1.83 13.94 3.97 8.34 2.19 0.85 0.37 0.40 0.38 0.37 0.41 0.46 0.28 0.48 0.23 0.59 -0.11 0.41 -0.02 -0.22 -0.06 -0.17 -0.17 -0.12 TABLE 5.4 Excess return statistics for the S&P 500, Excess Return (%) Average Std Dev Sharpe Ratio 5% VaR -25.88 NA* 1926–2013 1926–1955 1956–1985 1986-2013 8.34 11.67 5.01 8.33 20.23 25.40 17.58 17.73 0.41 0.46 0.28 0.47 NA* NA*