A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts As
Posted: Sun Jul 03, 2022 12:57 pm
A portfolio manager summarizes the input from the macro andmicro forecasters in the following table: Micro Forecasts AssetExpected Return (%) Beta Residual Standard Deviation (%) Stock A 231.2 54 Stock B 21 2.1 69 Stock C 20 0.8 58 Stock D 15 1.0 53 MacroForecasts Asset Expected Return (%) Standard Deviation (%) T-bills8 0 Passive equity portfolio 19 26 a. Calculate expected excessreturns, alpha values, and residual variances for these stocks.(Negative values should be indicated by a minus sign. Do not roundintermediate calculations. Round "Alpha values" to 1 decimalplace.) b. Compute the proportion in the active portfolio and thepassive index. (Negative values should be indicated by a minussign. Do not round intermediate calculations. Enter your answer asdecimals rounded to 4 places.) c. What is the Sharpe ratio for theoptimal portfolio? (Do not round intermediate calculations. Enteryour answer as decimals rounded to 4 places.) d. By how much didthe position in the active portfolio improve the Sharpe ratiocompared to a purely passive index strategy? (Do not roundintermediate calculations. Enter your answer as decimals rounded to4 places.) e. What should be the exact makeup of the completeportfolio (including the risk-free asset) for an investor with acoefficient of risk aversion of 3.2? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)