(iii) A fund manager has managed an equity portfolio for a client with a B =...

 

Transcribed Image Text:

(iii) A fund manager has managed an equity portfolio for a client with a B = 0.8 whose returns are analysed using Fama's decomposition. The following data was calculated: The risk-free rate is 4% and the market return is 8%. R Portfolio 18% Market 8% Risk-free 4% Total Risk, a Beta, 20% 0.9 1 0 12% 0% What level of return is attributable to the client's B? [1] Based on the actual ß of the portfolio what is the return on the portfolio from market timing? [2] What is the return due to pure security selection? [5] (iii) A fund manager has managed an equity portfolio for a client with a B = 0.8 whose returns are analysed using Fama's decomposition. The following data was calculated: The risk-free rate is 4% and the market return is 8%. R Portfolio 18% Market 8% Risk-free 4% Total Risk, a Beta, 20% 0.9 1 0 12% 0% What level of return is attributable to the client's B? [1] Based on the actual ß of the portfolio what is the return on the portfolio from market timing? [2] What is the return due to pure security selection? [5]

Answer rating: 100% (QA)

i The level of return attributable to the clients beta B can be calculated using Famas decomposition ... View the full answer