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Assume that stock market returns have the market index as a common factor, and that all...
Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 43%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 2.4%, and one-half have an alpha of –2.4%. The analyst then buys $1.5 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.5 million of an equally weighted portfolio of the negative-alpha stocks. a....
Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 47%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.5%, and one-half have an alpha of –4.5%. The analyst then buys $1.5 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.5 million of an equally weighted portfolio of the...
Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 50%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.6%, and one-half have an alpha of –4.6%. The analyst then buys $1.2 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.2 million of an equally weighted portfolio of the...
Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 47%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.5%, and one-half have an alpha of –4.5%. The analyst then buys $1.5 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.5 million of an equally weighted portfolio of the...
Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 31%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 2.0%, and one-half have an alpha of –2.0%. The analyst then buys $1.1 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.1 million of an equally weighted portfolio of the negative-alpha stocks. a....
Instructions I help < Question 8 (of 10) Save & Ext Submit 10.00 points Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 38% Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.2%, and one-half have an alpha of -4,2%. The analyst then buys $10 million of an equally weighted portfolio of the positive-alpha stocks and...
Need a help with both parts pelase. I need help with b1 and b2. Thank you. Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 47 % Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 45 %, and one-half have an alpha of-4.5 %. The analyst then buys $1.5 million of an equally...
The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 index. A hedge fund manager believes that Waterworks is underpriced, with an alpha of 2.3% over the coming month. Beta R-square Standard Deviation of Residuals 0.9 0.65 0.09 (i.e., 9% monthly) a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as Waterworks. Assume the residual returns on each...
Q2 (e) Assume for simplicity sake that one factor has been deemed appropriate to "explain" returns on stocds (0) How and there is no idiosyncratic risk. Derive the arbitrage pricing theory would you perform a test of the predictions of the capital asset pricing model given historical data (APT) model 2. Consider Tablo 1 Return and Variance a/c to the Stocks Sample Covariance Residual AlphaBeta Expected Variance and Return | with Market | Variance | (96) Return Market 3.60 4.80...
Assume that stock market returns do not resemble a single-index structure. (a) Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 2,000 stocks in order to construct a mean-variance efficient portfolio constrained by 2,000 investments. They will need to calculate (N) ____ expected returns, (N)___________ variances of returns and ________ covariances. Assume that stock market returns do follow a single-index structure. An investment fund analyzes 2,000 stocks in order to construct a mean-variance efficient...