Question
Assuming a two-factor APT world where the systematic risks are GDP risk and Oil risk, risk-free rate is 2%. Assume there exists GDP and Oil
Assuming a two-factor APT world where the systematic risks are GDP risk and Oil risk, risk-free rate is 2%. Assume there exists GDP and Oil factor portfolios that are tradeable. If a trader estimates the expected return of Portfolio ABC to be 17.0%, the alpha of Portfolio ABC is _______?
| Portfolio ABC | Factor Loading | Risk Premium |
| GDP | 0.8 | 5% |
| Oil | 1.5 | 7% |
| -0.5% | ||
| 0.5% | ||
| 1.0% | ||
| 1.5% | ||
| 2.0% |
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The Pillars Of Finance The Misalignment Of Finance Theory And Investment Practice
Authors: G. Fraser-Sampson
2014th Edition
1137264055, 978-1137264053
