An analyst is reviewing various asset alternatives and is presented with the following information relating to the broad equity market of Switzerland and various industries within the Swiss market that are of particular investment interest.

Assume that the Swiss market is perfectly integrated with the world markets.
Swiss Healthcare has a correlation of 0.7 with the GIM portfolio.
Swiss Watch has a correlation of 0.8 with the GIM portfolio.
Swiss Consumer Products has a correlation of 0.8 with the GIM portfolio.
A. Basing your answers only upon the data presented in the table above and using the international capital asset pricing model—in particular, the Singer–Terhaar approach—estimate the expected risk premium for the following:
i. Swiss Healthcare Industry ii. Swiss Watch Industry iii. Swiss Consumer Products Industry B. Judge which industry is most attractive from a valuation perspective.

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Expected risk premium for overall global investable market (GIM) portfolio Expected standard deviation for the GIM portfolio Expected standard deviation for Swiss Healthcare Industry equity investments Expected standard deviation for Swiss Watch Industry equity investments Expected standard deviation for Swiss Consumer Products Industry equity investments 3.5% 8.5% 12.0% 6.0% 7.5%