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 ...

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors,

Question:

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The consisting of all informed traders has a beta of 1.4 and an alpha of 3.82%. The market has an 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)

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... 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...