1. You are currently passively invested in an ASX200 index-tracking portfolio. However, you decide to do some...
Question:
1. You are currently passively invested in an ASX200 index-tracking portfolio. However, you decide to do some stock analysis and you uncover a stock that has the following characteristics:
α | β | σe2 | |
---|---|---|---|
A | -2.3% | 1.2 | 0.17 |
If the expected return on the market is 11%, the risk-free rate is 8% and the standard deviation of the market is 16%, what is the best Sharpe ratio you can get if you include asset A in your portfolio with the optimal weight?
0.1738
0.1956
0.2323
0.2152
2. From January 2017 through December 2019 the manager of “Australia’s Best" mutual fund did really well in timing the market. The manager was able to earn a holding period return of 32%, beating the market by 12% over the same period. After 3 years of strong performance, investors took notice and invested millions of dollars in the fund at the start of 2020, doubling the funds under management in a very short time. Unfortunately, the fund manager wasn’t so lucky since the start of 2020, earning an HPR of only 1% returns from January 2020 till now, underperforming the market by 7%. You calculated the arithmetic, geometric, and dollar-weighted average returns for the fund. Which return is the lowest?
Geometric average return
Arithmetic average return
Insufficient information to determine
Dollar-weighted return
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young