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In Problems 2123 below, assume the risk-free rate is 8% and the expected rate of return on the market is 18%. Two investment advisers are
In Problems 2123 below, assume the risk-free rate is 8% and the expected rate of return on the
market is 18%.
Two investment advisers are comparing performance. One averaged a 19% return and
the other a 16% return. However, the beta of the first adviser was 1.5, while that of the
second was 1.
a. Can you tell which adviser was a better selector of individual stocks (aside from the
issue of general movements in the market)?
Thank you
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