Suppose that the alpha forecasts in row 44 of Spreadsheet 8.1 are doubled. All the other data
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Suppose that the alpha forecasts in row 44 of Spreadsheet 8.1 are doubled. All the other data remain the same. Recalculate the optimal risky portfolio. Before you do any calculations, however, use the Summary of Optimization Procedure to estimate a back-of-theenvelope calculation of the information ratio and Sharpe ratio of the newly optimized portfolio. Then recalculate the entire spreadsheet example and verify your back-of-theenvelope calculation.
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