A portfolio has a market beta of 1.5, a factor loading of -2 to SMB and a sensitivity of 1 to HML. The portfolio has earned 22% return. What was the abnormal return on the portfolio, if the risk free rate was 0%, market's excess return was 6%, the SMB factor premium was -2% and the HML factor premium was 3%? 16% 6% 15% 21.5%
Abnormal return = Earned Return - Required return.
Firstly, calculate the required return,
Thus,
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
A portfolio has a market beta of 1.5, a factor loading of -2 to SMB and a sensitivity of 1 to HML. The portfolio has ear...
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