Question

Two investment advisors are comparing performance. One averaged a 19 percent rate of return and the other a 16 percent rate of return. However, the beta of the first investor was 1.5, whereas that of the second was 1.
a. Can you tell which investor was a better predictor of individual stocks (aside from the issue of general movements in the market)?
b. If the T- bill rate were 6 percent and the market return during the period were 14 percent, which investor would be the superior stock selector?
c. What if the T- bill rate were 3 percent and the market return were 15 percent?


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  • CreatedJune 21, 2015
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