Firms on the New York Stock Exchange were sorted into three portfolios high performers, medium performers,...

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Firms on the New York Stock Exchange were sorted into three portfolios high performers, medium performers, and low performers based on abnormal returns over the most recent six months. Each portfolio was tracked over the next 18 months. The results are shown below. High performers Medium performers Abnormal returns by portfolio Months 1-6 Months 7-12 0.9% 0.6% Low performers 0.3% 5.6% a) What trends do you observe in the behaviour of the high performance performers and low performance performers (1 mark)? 11.0% 0.0% -5.4% b) What are the names given to these trends? (1 mark) c) What trading strategy would you employ in Months 1-6 to make profits? (1 mark) d) How much abnormal return would you expect form the strategy (1 mark)? e) Explain why you may not be able to make these profits in real life? (1 mark) Months 13-18 -9.0% 1.20% Firms on the New York Stock Exchange were sorted into three portfolios high performers, medium performers, and low performers based on abnormal returns over the most recent six months. Each portfolio was tracked over the next 18 months. The results are shown below. High performers Medium performers Abnormal returns by portfolio Months 1-6 Months 7-12 0.9% 0.6% Low performers 0.3% 5.6% a) What trends do you observe in the behaviour of the high performance performers and low performance performers (1 mark)? 11.0% 0.0% -5.4% b) What are the names given to these trends? (1 mark) c) What trading strategy would you employ in Months 1-6 to make profits? (1 mark) d) How much abnormal return would you expect form the strategy (1 mark)? e) Explain why you may not be able to make these profits in real life? (1 mark) Months 13-18 -9.0% 1.20%

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a The high performers had a strong start with an abnormal return of 110 in months 16 followed by a d... View the full answer