Question
Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed, traders. The portfolio consisting
Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed, traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 3.82%. The market has an expected return of 10% and the risk-free rate is 4%.
What is the alpha for the fad followers?
Do not copy from Chegg and give complete answer with explanation
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Introduction To Finance Financial Management And Investment Management
Authors: Pamela P. Drake, Frank J. Fabozzi, Francesco A. Fabozzi
1st Edition
9811239657, 978-9811239656
