You manage a $ 3 2 million portfolio, currently all invested in equities, and believe that the
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Question:
You manage a $ million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but shortlived downturn. You would move your portfolio temporarily into Tbills, but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead, you decide to temporarily hedge your equity holdings with Emini S&P index futures contracts.
Required:
Should you be long or short the contracts?
If your equity holdings are invested in a marketindex fund, into how many contracts should you enter? The S&P index is now at and the contract multiplier is $
Note: Round your answer to decimal place.
How does your answer to part b change if the beta of your portfolio is
Note: Round your intermediate calculations and final answer to decimal place.
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