Mr & Mrs. Smith are analysts specializing in investments. The need to respond to the following problems
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Question:
[a] Mr. Bob, CFA, is an investment manager of a Japanese financial institution. He manages a JPX ETF fund with an expected risk premium of 7% and a standard deviation of 5%. The rate on Japanese Treasury bills is 2%. One of his clients decides to invest JPY 15,000,000 in the JPX ETF fund and JPY 5,000,000 in the Japanese T-bills fund. What are the expected return and standard deviation of return on Mr. Bob's client's portfolio?
[b] Mr. Chris, CFA, is a Japanese investor living in Tokyo. Most of his funds are invested in a portfolio with an annual risk premium of 0.07 and a variance of 0.0300. Suppose that the average Japanese market risk premium is 0.05, with a variance of 0.0350. What is the best guess of Mr. Chris capital allocation between the Nikkei 225 index and the Japanese T-Bills?
[c] What are the strong points of the behavioral critique of the efficient market hypothesis? What are some problems with the critique? Explain!
Related Book For
Managerial Economics Foundations of Business Analysis and Strategy
ISBN: 978-0078021718
11th edition
Authors: Christopher Thomas, S. Charles Maurice
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