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Suppose that you are a portfolio manager for an actively managed portfolio. Your mandate is to beat a benchmark index by holding a portfolio of

Suppose that you are a portfolio manager for an actively managed portfolio. Your mandate is to beat a benchmark index by holding a portfolio of some subset of stocks in the index. You cannot short sell stocks or trade derivatives. You develop a quantitative model to calculate a price target for every stock in the benchmark index. Explain how you could use these price targets to manage your portfolio.

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