EXERCISE 17.1
Prove that the inverse of

is given by
EXERCISE 17.2
The empirical covariance between the 120 returns of IBM and PanAm is

(see Example
17.2). Test if the true covariance is
zero. Hint: Use Fisher's

-transform.
EXERCISE 17.3
Explain why in both Figures
17.2 and
17.3 the
portfolios have negative returns just before the end of the series,
regardless of whether they are optimally weighted or not! (What happened in
December 1987?)
EXERCISE 17.4
Apply the method used in Example
17.2
on the same data (Table
B.5)
including also the Digital Equipment company.
Obviously one of the weights is negative.
Is this an efficient weighting?
EXERCISE 17.5
In the CAPM the

value tells us about the performance of the portfolio
relative to the riskless asset. Calculate the

value for each single stock price
series relative to the ``riskless'' asset IBM.