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Using historical risk premiums over the 1926-2016 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio
Using historical risk premiums over the 1926-2016 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio if the current risk-free interest rate is 3%? Use Table 5.4. (Round your answer to 2 decimal places.)
Market Index Big/Growth Big/Nalue Small/Growth Small/Nalue A. 1926-2016 Mean excess return (annualized) Standard deviation (annualized) Sharpe ratio Lower partial SD (annualized) Skew Kurtosis VaR (1 %) actual (monthly) returns VaR(1%) normal distribution % of monthly returns more than 3 08.30 18.64 0.45 19.49 0.20 18.50 0.43 18.57 -0.10 8.79 26.21 0.34 25.92 0.70 15.56 28.36 0.55 25.98 0.47 22.78 19.05 -19.53 15.63 22.21 -20.47 - 17.87 13.95 14.68 20.59 -16.92 0.94% 0.75% 0.94% 0.75% 0.57% SD below mean Expected shortfall (monthly) B. 1952-2016 Mean excess return (annualized) Standard deviation (annualized) Sharpe ratio Lower partial SD (annualized) -20.33 24.30 25.02 -25.76 13.34 1842 15.54 22.33 0.32 23.79 -0.36 14.89 0.50 15.95 15.67 -0.36 16.01 -0.29 19.36 -0.35 -0.52 ew Kurtosis VaR (1%) actual (monthly) returns VaR(1 %) normal distribution % of monthly returns more than 3 10.90 9.84 0.66% -16.93 14.41 - 10.80 9.37 0.66% -9.89 -11.26 0.80% 0.93% SD below mean Expected shortfall (monthly) - 18.85 -17.99 -21.30 -24.66 -28.33 Table 5.A Statistics for monthly excess returns on the market index and four "style portfolios Sources: Authors' calculations using data from Prof. Kenneth French's Web ste: http://mbatuck.dartmouth.edu/pages/faculty/ken.french/ data_lbrary.htmlStep by Step Solution
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