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Activity Number: 451
Type: Contributed
Date/Time: Wednesday, August 6, 2008 : 2:00 PM to 3:50 PM
Sponsor: Business and Economics Statistics Section
Abstract - #301649
Title: Applications of Statistics in Finance Using the Statistics Online Computational Resource (SOCR)
Author(s): Nicolas Christou*+ and Ivo D. Dinov
Companies: University of California, Los Angeles and University of California, Los Angeles
Address: 8125 Math Sciences Bldg., Los Angeles, CA, 90095,
Keywords: efficient frontier ; covariance ; portfolio risk and return ; stock market ; Java applets ; SOCR
Abstract:

In this paper we present an application of statistics in finance using SOCR. Most, if not all, college students have some familiarity with the stock market and therefore can understand the problem easily. It is the real data analysis that students find interesting and sometimes challenging. Here we explore the building of efficient portfolios using real stock market data through optimization examples of two, or multiple stocks, and how covariance and correlation can help the investor to diversify his or her risk. We discuss why diversification works, but also the problems that arise in portfolio management. Stock market data can be incorporated at any level of Mathematics, Statistics and Economics education. With the use of these newly designed SOCR applets and learning materials, we can enhance the teaching of statistics and portfolio management in varieties of curricula.


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