Economy has three types of people-alpha for the fad follower

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Assume that the economy has three types of people. 15% are fad followers, 75% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.3 and an alpha of 3.94%. The market has an expected return of 12% and the risk-free rate is 4 %.

What is the alpha for the fad followers? Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary)

Reference no: EM132074408

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