What alpha do the informed traders? make

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Reference no: EM133332049

Question: Assume the economy consists of three types of people. 45% are fad? followers,

51% are passive investors who hold the market? portfolio, and 4% are informed traders. The portfolio consisting of all the informed traders has a beta of 1.53 and an expected return of 15%. The market expected return is 10%. The? risk-free rate is 4%.

a. What alpha do the informed traders? make?

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

c. What alpha do the fad followers? make

Reference no: EM133332049

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