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Use the information in the following table to answer the questions in parts a.-b. For the analyst recommendations, 1 is the best, and 5 is
Use the information in the following table to answer the questions in parts a.-b. For the analyst recommendations, 1 is the best, and 5 is the worst. Assume you have a total of $1 million to invest in the strategies described below. Also assume you use no leverage, so that the total value of your holdings (long + absolute value of short) is $1 million. a. Suppose you form a long-short portfolio following the Boni and Womack (2005) approach that goes long all upgraded stocks and short all downgraded stocks. If your strategy equal weights the long and short portfolios (i.e., same total dollar amount long and short), equal weights industries within each long or short portfolio, and equal weights positions within each long/short industry group, which tickers would you hold and how much would you invest in each? Long (tickers and dollar amounts) Short (tickers and dollar amounts) b. Repeat part a., except instead of equal weighting the stocks within each long/short industry group, value weight the stocks within each long/short industry group, but maintain the same total dollar amount long and short and an equal industry weight within each long or short portfolio. Long (tickers and dollar amounts)
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