Question
1. Suppose you have $1000 to invest and are using two stocks (A and B) to construct a market-neutral portfolio. Based on your analysis, the
1. Suppose you have $1000 to invest and are using two stocks (A and B) to construct a market-neutral portfolio. Based on your analysis, the weight for A = 37.4 (attention, it is 37.4, not 37.4%),
- calculate the weight for B.
- What do those numbers (the two weights) mean?
2. If based on the CAPM regression on Facebook during 2017 - 2018, we get the following regression equation:
y = 0.005 + 1.26x
- What is Facebook's alpha? What is its historical beta? What is Facebook's future beta?
- What is your judgement about Facebook based on the performance in 2017-2018? Is it a good investment according to the criteria we mentioned in the class?
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ISE Fundamental Managerial Accounting Concepts
Authors: Thomas P. Edmonds, Christopher Edmonds, Mark A. Edmonds, Philip R. Olds
10th Edition
1265045925, 9781265045920
