Question
You are given the following information: stock A stock B Market variance 5.42% 4.27% 3% return 7.36% 21.74% 5.93% beta 2.98 1.88 tracking error 1%
You are given the following information:
| stock A | stock B | Market | |
| variance | 5.42% | 4.27% | 3% |
| return | 7.36% | 21.74% | 5.93% |
| beta | 2.98 | 1.88 | |
| tracking error | 1% | 6% |
The risk-free rate is 1.4%. The correlation between A and B is -0.91. Suppose you invest 0.68 in A and 1-0.68 in B, compute the alpha of the resulting portfolio.
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Financial Management For Public, Health, And Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
6th Edition
150639681X, 978-1506396811
