Karim is deciding whether to invest his capital in the Carletto Fund or the Josep Fund....
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Karim is deciding whether to invest his capital in the Carletto Fund or the Josep Fund. To inform his decision, Karim decides to examine past portfolio returns. (a) Describe the decisions Karim must make when sampling portfolio returns. Are there any specific difficulties Karim might face when sampling portfolio returns? (2 marks) [Type your answer here] (b) After sampling portfolio returns for both funds, Karim performs regression analyses. Karim arrives at the following regression estimates for the Carletto Fund: rp,t = rf,t = a + (rm,t rf,t) + t = 0.054 +0.957. (rm,t rf,t) + Et - - Karim arrives at the following regression estimates for the Josep Fund: rp,t rf,t = a + B(rmt - rft) + t = -0.044+0.894 (m,t = rft) + Et - If we assume all estimates are statistically significant and Karim sampled returns at the yearly frequency, how should we interpret the Karim's alpha (a) estimates? (2 marks) Karim is deciding whether to invest his capital in the Carletto Fund or the Josep Fund. To inform his decision, Karim decides to examine past portfolio returns. (a) Describe the decisions Karim must make when sampling portfolio returns. Are there any specific difficulties Karim might face when sampling portfolio returns? (2 marks) [Type your answer here] (b) After sampling portfolio returns for both funds, Karim performs regression analyses. Karim arrives at the following regression estimates for the Carletto Fund: rp,t = rf,t = a + (rm,t rf,t) + t = 0.054 +0.957. (rm,t rf,t) + Et - - Karim arrives at the following regression estimates for the Josep Fund: rp,t rf,t = a + B(rmt - rft) + t = -0.044+0.894 (m,t = rft) + Et - If we assume all estimates are statistically significant and Karim sampled returns at the yearly frequency, how should we interpret the Karim's alpha (a) estimates? (2 marks)
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a Heres what Karim needs to decide when sampling portfolio returns Length of the sampling period How ... View the full answer
Related Book For
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Posted Date:
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