The Largeco pension fund aggregates its entire portfolio every month across all asset classes and computes its net returns, Ri. Exhibit 4-7 displays these monthly returns for one year, along with the market returns and the risk-free treasury bill rates for those months. Use Equations (4.1) and (4.2) to estimate the beta, alpha, and cost of capital for the Largeco portfolio. How do you evaluate its investmentperformance?

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EXHIBIT LARGECO RETURNS Month 1.51% 1.34% -0.39% -2.45% 1.74% 2.24% March -1.16% -2.50% 1.35% May -3.81% -3.87% 0.16% 1.95% 0.10% 0.11% 0.11% 0.11% 0.15% 0.16% August Se ptember 2.01% N ovember December 3.76% ri-0.04 + 1.63 * 0.07-0.09 * 0.025-0.684 0.035 + 0.264 0.05-14.1 % (4.1 1) 0.04 + 2.04 * 0.07 + 1.04 * 0.025-1.46 * 0.035 + 0.15 * 0.05 16.6% (4.12)