A quantitative portfolio manager is very good at managing against the Russell 2000 Index. In fact, she
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A quantitative portfolio manager is very good at managing against the Russell 2000 Index. In fact, she is expected to achieve an B of 0.5% per month. Unfortunately, her benchmark is the S&P 500. She thus shorts the required amount of Russell 2000 Index futures and purchases an equivalent amount of S&P 500 Index futures contracts. Suppose that the S&P 500 is expected to have a return of 6% in the next month.
(a) What would be the expected return of her new portfolio?
(b) Would the realized return be similar? Explain.
Related Book For
Statistics For Managers Using Microsoft Excel
ISBN: 9780133130805
7th Edition
Authors: David M. Levine, David F. Stephan, Kathryn A. Szabat
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