QUESTION 55 How to construct typical zero investment arbitrage portfolio as a hedge fund manager if you have the following assets: Asset p which has an excess return of R_p,t that follows the following process: R_p,t=alpha_p+beta_p*R_m,t+e_p,t, where e_p,t is idiosyncratic risk of the asset that on average will be zero over time. A risk-free asset which has a return of O. The market portfolio has a return of R_mit As a hedge fund manager, your purpose is to deliver alpha_p on average. Notations: Denote the weights you put on asset p, risk-free asset, and the market portfolio, wp, wf, and wm, respectively. Assume that you need zero collateral for short selling. wp=0.5 wm=-0.5*beta_p wf=0.5*beta_p-0.5 wp=1 wm=0 O wf-0 wp=1 wm=-beta_p a wf-beta_p-1 wp=1 wm=-1 wf=-beta_p