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Can someone please show how to track this portfolio please? thank you! 2. You currently suspect that pharmaceutical stocks are undervalued (as a conse- quence
Can someone please show how to track this portfolio please? thank you!
2. You currently suspect that pharmaceutical stocks are undervalued (as a conse- quence of a drug-testing scandal). To investigate, you collect data on a stock indices from four industries: pharmaceutical, steel, textile, and beer. You are concerned with two risks: fluctuations in the overall stock market index and fluc- tuations in oil prices. The data you've collected are the following. E(r.) BMkt Boil Pharma 1% 1.15 0.0 Steel 6% 1.30 0.4 Textile 3% 0.60 0.1 Beer 4% 0.80 0.1 (a) Construct a portfolio using the steel, textile, and beer indices that tracks the pharmaceutical index. (b) Is there a mispricing? (c) What is your expected profit if your broker allows you to borrow a total of $10,000 across all of your short positions? (d) Is this strategy riskless? 2. You currently suspect that pharmaceutical stocks are undervalued (as a conse- quence of a drug-testing scandal). To investigate, you collect data on a stock indices from four industries: pharmaceutical, steel, textile, and beer. You are concerned with two risks: fluctuations in the overall stock market index and fluc- tuations in oil prices. The data you've collected are the following. E(r.) BMkt Boil Pharma 1% 1.15 0.0 Steel 6% 1.30 0.4 Textile 3% 0.60 0.1 Beer 4% 0.80 0.1 (a) Construct a portfolio using the steel, textile, and beer indices that tracks the pharmaceutical index. (b) Is there a mispricing? (c) What is your expected profit if your broker allows you to borrow a total of $10,000 across all of your short positions? (d) Is this strategy riskless Step by Step Solution
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