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What is the optimal weight in the active portfolio for stock

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Reference no: EM132826905

Problem 1: An active investor has identified 3 stocks to form an active portfolio following the Treynor-Black Model. Stock J has an alpha of 5.25% and a residual standard deviation (RSD) of 28%; stock K has alpha = -2.95% and RSD = 18%; stock L has alpha = 3.75% and RSD = 22%. What is the optimal weight in the active portfolio for stock L?

Reference no: EM132826905

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