What is the information ratio of a passive manager

Assignment Help Risk Management

Reference no: EM13925531

1. What is the information ratio of a passive manager?

2. What is the information ratio required to add a risk-adjusted return of 2.5 percent with a moderate risk aversion level of 0.10? What level of active risk would that require?

3. Starting with the universe of MMI stocks, we make the assumptions

Q = MMI portfolio

fQ = 6%

B = capitalization-weighted MMI portfolio

We calculate (as of January 1995) that

Portfolio

b with Respect to B

1.000

b with Respect to Q

0.965

15.50%

1.004

1.000

15.82%

0.865

0.831

14.42%

where portfolio C is the minimum-variance (fully invested) portfolio. For each portfolio (Q, B, and

C), calculate f, a, w, SR, and IR.

Reference no: EM13925531

Questions Cloud

Ethics is the study of : Question 1: Ethics is the study of Question 2: One studies ethics because

What are the firm''s major strengths and weaknesses : Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?

How should kb manager address issue of aging baby boomers : Which do you think are the most important environmental forces for KB Home? Why? Are there environmental forces besides those mentioned that you think KB management needs to focus on?

Natural gas producing firm is exposed to fluctuations : A natural gas producing firm is exposed to fluctuations in market prices of natural gas. If market conditions are favorable (high gas prices) the firm will realize a pre-tax operating profit of $300 million. If market conditions are unfavorable, then..

What is the information ratio of a passive manager : What is the information ratio of a passive manager? What is the information ratio required to add a risk-adjusted return of 2.5 percent with a moderate risk aversion level of 0.10?

What is the implied risk-free rate : The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. What is the implied risk..

Equipment is classified into one of eight life categories : Equipment is classified into one of eight life categories and depreciated by formula. Buildings are classified into one of 8 class lives and depreciated by the MACRS table.

Customers declared bankruptcy : customers declared bankruptcy in 2013, what journal entry would be used to write off its $20 balance.

Demonstrate understanding of the legal environment : Can the Australian consumers of the energy drinks you considered in question 1 bring any Australian Consumer Law (ACL) cause of action under Part 3-5 against the manufacturers of those drinks?

User Account

All Pages