Question
4. a. Describe the techniques for determining the performance of any portfolio. b. The variance- covariance matrix for three securities is given below Security X
4. a. Describe the techniques for determining the performance of any portfolio. b. The variance- covariance matrix for three securities is given below
Security X Y Z X 108 - 56 95 Y -56 214 137 Z 95 137 180
Assume a portfolio is constructed with these three securities (X:Y:Z: = 0.25: 0.45:0.30), calculate portfolio risk.
c. A mutual fund has earned an annual return of 21% over five years period while the average market return was only 13%. The risk free rate is 7.5%. Mutual fund had a beta of 1.45. The SD of returns of mutual fund and the market index were 40% and 30 % respectively. Calculate Famas net selectivity for funds, showing the decomposition of performance.
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