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You, a portfolio manager, are using the CAPM model for making recommendations to your clients. Your research department developed the information shown in the following
You, a portfolio manager, are using the CAPM model for making recommendations to your clients. Your research department developed the information shown in the following exhibit. Stock X Stock Y Market Index Risk Free Rate Forecasted Return 10% 14% 9% 5% Stand Deviat 30% 20% 15% Identify and justify which stock (Stock X or Stock Y) would be more appropriate for an investor who wants to hold this stock as a single stock portfolio. Stock Y; Sharpe ratio of Stock Y is greater than Sharpe ratio of Stock X Stock Y; Alpha of stock Y is greater than alpha of stock X Stock X; Sharpe ratio of Stock X is greater than Sharpe ratio of Stock Y Stock X; Alpha of stock X is greater than alpha
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