Suppose that your benchmark portfolio is the S&P Index (M). The input list below includes the data
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Question:
Suppose that your benchmark portfolio is the S&P Index (M). The input list below includes the data for the passive index as well as the Emerging Market Fund (EMF). EMF has a positive alpha. You want to construct an optimal active portfolio using a combination of M and EMF.
S&P Index | EMF | |
Risk premium | 0.7% | 1.74% |
Standard deviation | 4.31% | 10.49% |
Sharpe ratio | 0.16 | |
Alpha | 0.75% | |
Beta | 1.41 | |
Residual standard deviation | 8.55 |
What is the information ratio of EMF?
Find the optimal weights of M and EMF using the Treynor-Black model.
Find the Sharpe ratio of the optimal active portfolio.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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