Two fund managers are comparing performance. One averaged a 19% rate of return and the other a 15% rate of return. However, the beta of the first fund manager was 1.5, whereas that of the second fund manager was 0.8.

1) If the T-bill rate was 6% and the market return during the period was 14%, which fund manager would be considered the superior stock selector?

3) How will you form a passive portfolio that would have the same beta as the second investor?

4) The two fund managers select the individual stocks by working on fundamental analysis of the firms. According to your calculations in 1), is it likely that the market is in the semi-strong form of efficiency?