Question: Using historical risk premiums from Table 5.5 over the 19272018 period as your guide, what would be your estimate of the expected annual HPR on

Using historical risk premiums from Table 5.5 over the 19272018 period as your guide, what would be your estimate of the expected annual

Using historical risk premiums from Table 5.5 over the 19272018 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio if the current risk-free interest rate is 2.35%? (Round your answer to 2 decimal places.) Expected annual HPR % Market Index Big/Growth Big/Value Small/Growth Small/Value 8.29 11.69 8.07 18.35 18.52 0.45 0.44 8.99 26.06 0.34 28.95 0.68 7.85 21.68 0.19 7.85 24.70 0.47 25.44 1.63 18.43 21.10 -0.11 5.63 15.38 28.21 0.55 26.18 2.18 22.32 - 20.57 - 17.78 0.57% - 13.61 - 11.79 0.94% - 14.48 -11.69 0.75% - 19.40 - 15.69 0.85% -20.48 -16.80 0.85% - 19.60 - 19.80 -23.87 -24.67 -25.33 A. 1927-2018 Mean excess return (annualized) Standard deviation (annualized) Sharpe ratio Lower partial SD (annualized) Skew Kurtosis VaR (1%) actual (monthly) returns VaR (1%) normal distribution % of monthly returns more than 3 SD below mean Expected shortfall (monthly) B. 1952-2018 Mean excess return (annualized) Standard deviation (annualized) Sharpe ratio Lower partial SD (annualized) Skew Kurtosis VaR (1%) actual (monthly) returns VaR (1%) normal distribution % of monthly returns more than 3 SD below mean Expected shortfall (monthly) 7.60 14.76 0.52 7.46 15.37 0.49 17.14 -0.38 1.84 10.04 16.42 0.61 17.60 7.17 22.13 0.32 23.81 -0.41 2.11 13.16 18.41 0.71 18.26 -0.32 2.25 -0.34 3.44 17.25 -0.54 1.95 - 10.71 -9.28 0.62% - 10.94 -9.70 - 12.26 - 10.19 1.06% -16.96 -14.26 0.93% - 14.97 -11.27 1.19% 0.66% - 18.85 - 17.78 -21.16 -24.11 - 24.45 Table 5.5 Statistics for monthly excess returns on the market index and four "style" portfolios Source: Authors' calculations using data from Prof. Kenneth French's web site: http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/ data_library.html

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