Determine what is the alpha of the passive investors

Assignment Help Financial Econometrics

Reference no: EM13334453

Assume the economy consisted of three types of people. 50% are fad followers, 45% are passive investors (they have read this book and so hold the market portfolio), and 5% are informed traders. The portfolio consisting of all the informed traders has a beta of 1.5 and an expected return of 15%. The market expected return is 11%. The risk-free rate is 5%.

a. What alpha do the informed traders make?

b. What is the alpha of the passive investors?

c. What is the expected return of the fad followers?

d. What alpha do the fad followers make?

Reference no: EM13334453

Questions Cloud

What is the voltage across the capacitor at that time : An RC circuit with C = 38.8 µF and R = 6.5 has a 27 V source in it. With the capacitor initially uncharged, an open switch in the circuit is closed. What is the voltage across the capacitor at that time

Explain the solution with stirring : A solution has [Cl-] = 0.041 mol/L and [I-] = 0.073 mol/L. Finely divided, solid Pb(NO3)2 is slowly added to the solution with stirring. SALT=PbCl2 Ksp=1.6x10-5 SALT=Pbl2 Ksp=7.1x10-9 What are [Pb2+ ], [Cl- ] and [I- ] at the instant the second pr..

Explanation of how the presentation will target : Explanation of how the presentation will target this audience specifically

Analyze a publicly traded companys financial statements : Analyze a publicly traded company's financial statements for the prior five years. Include the following items as supplemental schedules to the analysis

Determine what is the alpha of the passive investors : Assume the economy consisted of three types of people. 50% are fad followers, 45% are passive investors (they have read this book and so hold the market portfolio), and 5% are informed traders.

Develop a new application system for your business partner : You have been assigned as the manager on a project to develop a new application system for your business partner. You were given two weeks to develop a project plan and high level cost estimates.

What is the resulting charge on the capacitor : A 22 V battery is connected to a parallel-plate capacitor with a plate area of 0.28 m2 and a plate separation of 2.1 mm. What is the resulting charge on the capacitor

Determine with what frequency do they oscillate : two equal masses are attached to the ends of a spring whose force constant is k. With what frequency do they oscillate

Explain acetic acid and methlyene blue : Doing a kinetics lab with HCL, Acetic Acid and Methlyene Blue. The reaction rate using spectrotophetry. Directions say to use the initial slope and divide by the extinction coefficient to get the reaction rate.

User Account

All Pages