Expected return over the benchmark, Risk Management

Assignment Help:

The Investment Committee is big on active management, and believes that there are areas/pockets of inefficiencies in the market. Knowing that you have taken Finance 455 at X-University, the Committee asks that you look into constructing an equity portfolio benchmarked to the Dow Jones Industrial Average (DJIA). They would like for you to make an equity portfolio that can be expected to create at least 2% of alpha (above the DJIA) with a tracking error budget of 4% (or stated differently, an Information Ratio of 0.50).

Based on that information, and with the Excel Spreadsheet given (showing historical return data for the DJIA component stocks), design a portfolio that can yield a 2% enhance in expected return over the benchmark (alpha), with a maximum of 4% tracking error (Information Ratio at least 0.50).

 


Related Discussions:- Expected return over the benchmark

Monetery value, What is the monetary certainty equivalent, Risk Management

What is the monetary certainty equivalent, Risk Management

Determine the measurement of risk, Determine the Measurement of Risk ...

Determine the Measurement of Risk There are three methods: (1) Volatility: Volatility may be described as range of movement (or price fluctuation) from the expected lev

What is meant by permit-to-work systems, Question: A safe system of wor...

Question: A safe system of work is a formal procedure which results from a systematic examination of a task in order to identify all the hazards and assess the risks with a vie

Stakeholder analysis, Stakeholder Analysis In the case of syringe manag...

Stakeholder Analysis In the case of syringe management plan, the stakeholders include Maribyrnong Council, Yarra Council and other neighboring ones, manufacturers, distributors

Decide and adopt methods to manage the risk, There are 5 primary steps in a...

There are 5 primary steps in assessing risk in the workplace wrt to H&S, identify 3 and discuss the what actions should be taken to manage or negate the risks posed - The sect

Determine the optimum prices and outputs, The basic question in this case i...

The basic question in this case is whether Jetliners and Acme Airline should work together to develop a new super sized airframe or should each company seek to develop its own vers

Bankruptcy of lehman brothers, In its early stages, the financial crisis ma...

In its early stages, the financial crisis manifested itself as an acute liquidity shortage among financial intermediaries. In this phase, concerns over the solvency of the sophisti

Contingency plan, Part 1: Contingency plan Create contingency plans for the...

Part 1: Contingency plan Create contingency plans for the following scenarios: > One of your highly qualified consultants has given three months notice and is planning to move to a

State about the management risk, State about the Management Risk Man...

State about the Management Risk Management, all said and done, is made of people who are mortal, fallible and capable of making a mistake or a poor decision. Errors made by

Currency hedging for exporting and importing company, I want an assignment ...

I want an assignment on a exporting and importing company and how does it do currency hedging and reduce the risk of currency fluctuation

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd