The finance committee of an endowment has decided to shift part of its investment in an index

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The finance committee of an endowment has decided to shift part of its investment in an index fund to one of two professionally managed portfolios. Upon examination of past performance, a committee member proposes to choose the portfolio that achieved a greater alpha value.
a. Do you agree? Why or why not?
b. Could a positive alpha be associated with inferior performance? Explain.
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Essentials of Investments

ISBN: 978-0078034695

9th edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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