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Assume that the economy has three types of people. 15% are fad followers, 75% are passive investors, and 10% are informed traders. The portfolio consisting

  1. Assume that the economy has three types of people. 15% are fad followers, 75% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.3 and an alpha of 4.98%. The market has an expected return of 12% and the risk-free rate is 4 %.

What is the alpha for the fad followers?

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