Question

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 3.82%. The market has an expected return of 10% and the risk-free rate is 4 %.
What is the alpha for the fad followers? Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary)



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  • CreatedSeptember 19, 2013
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