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A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Asset Expected Return ( % ) Beta
A portfolio manager summarizes the input from the macro and micro forecasters in the following table:
Micro Forecasts
Asset Expected Return Beta Residual Standard Deviation
Stock A
Stock B
Stock C
Stock D
Macro Forecasts
Asset Expected Return Standard Deviation
Tbills
Passive equity portfolio
Required:
Calculate expected excess returns, alpha values, and residual variances for these stocks.
Compute the proportion in the active portfolio and the passive index.
What is the Sharpe ratio for the optimal portfolio?
By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy?
What should be the exact makeup of the complete portfolio including the riskfree asset for an investor with a coefficient of risk aversion of
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