Portfolio position can be hedged from overall stock market

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If the S&P contracts have a multiplier of $500 and your $2.0M hedge fund stock portfolio has a beta of 1.2, then your portfolio position can be hedged from overall stock market volatility for 3 months by selling how many S&P futures contracts beginning of the quarter? Assume the S&P index is at 1,200 and for simplicity; your portfolio pays no dividends.

Assume if your portfolio alpha is 4%. What would be your portfolio return if the stock market declines by 10% during the quarter? Explain your answer.

Reference no: EM13805606

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