$($Hand written$)$ Problem $3$

You are trying to determine who is a better "market player" between your two friends $-$ Barbara and

Oliver $-$ who are aspiring to be professional investment portfolio managers.

Your research into their online brokerage trades has turned up the following performance information:

The risk$-$free rate is $1\%$ and the standard deviation for the Benchmark portfolio is $3\mathrm{.}50\%,$ Barbara's

portfolio is $5\mathrm{.}00\%,$ and Oliver's portfolio is $3\mathrm{.}00\%.$

Compare Barbara and Oliver's performance relative to the benchmark in terms of portfolio

returns. $3$ points

If they are beating the market, determine the sources of their success in terms of security

selection and asset allocation.

a$.$ Who is superior in security selection? $3\mathrm{.}5$ points

b$.$ Who is superior in asset allocation? $3\mathrm{.}5$ points