Case Study 3

Fund F has been investing in stocks and bonds. You are evaluating the performance of Fund F by comparing its performance with the performance of an appropriate benchmark portfolio B. The performance and weights of F and B over the last year are given in the table below: Asset Class Weight in F Weight in B 0.6 Stocks 0.5 Bonds 0.5 Attribute the performance of Fund F against benchmark portfolio B in the stock class. What is the attribution due to the asset allocation in the stock class? What is the attribution due to the security selection in the stock class? 0.4 Return from F O a. -0.005, -0.008 O b. 0.003; 0.004 O c. 0.012, 0.008 O d. 0.008; 0.012 10% Return from B 3% 8% 5%

The fund created by JPM to exploit overconfidence, loss aversion and momentum biases is described on their website:  The ticker symbol for the fund is JIVAX. It was launched in 2005. Question: What has been the return to the fund from Jan 31, 2005 to the current date? Please provide the starting price, ending price and return over the time period.

Help me please

Please show work, don't use EXCEL

Karen Kay, a portfolio manager at Collins Asset Management, is using the capital asset pricing model for making recommendations to her clients. Her research department has developed the information shown in the following exhibit. Forecast Returns, Standard Deviations, and Betas Stock X Stock Y Market index Risk-free rate Forecast Return 14.0% 17.0% 14.0% 5.0% Standard Deviation 36% 25% 15% Beta 0.8 1.5 1.0 a. Calculate expected return and alpha for each stock. b. Identify and justify which stock would be more appropriate for an investor who wants to i. Add this stock to a well-diversified equity portfolio. ii. Hold this stock as a single-stock portfolio.

Karen Kay, a portfolio manager at Collins Asset Management, is using thecapital asset pricing model (CAPM) for making recommendations to her clients.Her research department has developed the information shown in the followingexhibit.Forecast Returns, Standard Deviations, and BetasForecast Return Standard Deviation BetaLow β stock (X) 14.0% 36% 0.8High β stock (Y) 17.0% 25% 1.5Market index 14.0% 15% 1.0Risk-free rate 5.0%(a) Calculate expected return and alpha for each stock.(b) Identify and justify which stock would be more appropriate for an investorwho wants to add this stock to a well-diversified equity portfolio.(c) Now consider Karen employs the “Betting Against Beta” strategy and let, , and denote the portfolio weights of the investmentin each of the asset classes (e.g. risk-free asset, low beta stock, market index,high beta stock, respectively) such that .According to its investment mandate, Collins Asset Management shouldtarget a gross leverage of 2.3. How much does she have to…

If a sophisticated investor consistently rebalances their portfolio every year among 14 different open-ended sector funds within four assets classes, which provider would be the most value-added? A : Local commercial bank  B : Boutique money manager  C : A large family of funds  D : Financial supermarket

You are given the following information for two funds A and B, relating to their performance over the last five years. A B Market Risk-free Investment Cumulative Total Return Covariance of Standard deviation Return over 5 Years of Return with Market 76.20% 0.22 0.044 101.10% 0.32 0.075 92.50% 0.25 40.30% Calculate the Treynor, Sharpe and Jensen performance measures for Funds A and B. What do they tell you about the performance of the funds?

1. A credit portfolio manager is expecting corporate credit spreads to widen over the next several months. What are two ways that she can take advantage of the excess return (+coupon payments) relative to risk-free assets (i.e. treasuries) but limit the impact of the expected moves?

As the chief investment officer for a money management firm specializing in taxable individual investors, you are trying to establish a strategic asset allocation for two different clients. You have established that Ms. A has a risk-tolerance factor of 8, while Mr. B has a risk-tolerance factor of 27. The characteristics for four model portfolios follow: ASSET MIX Bond 93% 75 32 13 Portfolio 1 2 3 4 Stock 7% 25 GB 87 a. Calculate the expected utility of each prospective portfolio for each of the two clients. Do not round intermediate calculations. Round your answers to two decimal places. 1 2 3 Portfolio Ms. A ER 8% 9 10 11 b. Which portfolio represents the optimal strategic allocation for Ms. A? Which portfolio is optimal for Mr. B? Portfollo-Select-represents the optimal strategic allocation for Ms. A. Portfolio Select is the optimal allocation for Mr. B. c. For Ms. A, what level of risk tolerance would leave her indifferent between having Portfolio 1 or Portfolio 2 as her strategic…

In a recent 5tear period, mutual fund manager Diana sharks produced the following percentage rates of return for the Mesozoic fund. Rates of return on the market index are given for comparison.  A. Calculate the average return on both the fund and the index and the standard deviation of the returns on each. Did Ms. Sauros do better or worse than the market index on these measures?

An individual with only $10,000 to invest is most likely better off investing in Select one: A. ETFs to increase the diversification. B. individual equities to increase portfolio efficiency. C C. individual bonds and individual equities to increase efficiency. D. mutual funds to increase the expected return. What is the correlation coefficient for two assets with a covariance of .0032, if asset 1 has a standard deviation of 12 per cent and asset 2 has a standard deviation of 9 per cent? Select one: C A. 0.3456 C B. 1.5980 C. 0.8721 D. 0.2963

Sharon​ Smith, the financial manager for Barnett​ Corporation, wishes to select one of three prospective​ investments: X,​ Y, and Z. Assume that the measure of risk Sharon cares about is an​ asset's standard deviation. The expected returns and standard deviations of the investments are as​ follows: Investment Expected return Standard deviation X 17​% 7​% Y 17​% 8​% Z 17​% 9​%   a.  If Sharon were risk​ neutral, which investment would she​ select? Explain why. b.  If she were risk​ averse, which investment would she​ select? Why? c.  If she were risk​ seeking, which investments would she​ select? ​ Why? d.  Suppose a fourth​ investment, W, is available. It offers an expected return of 18​%,and it has a standard deviation of 9​%. If Sharon is risk​ averse, can you say which investment she will​ choose? Why or why​ not? Are there any investments that you are certain she will not​ choose?

What risks are inherent in using the expected future cash flow method of evaluating projects? In what circumstances would you choose to use a dividend discount model rather than a free cash flow model to value a firm?

​(Capital asset pricing​ model)  Grace Corporation is considering the following investments. The current rate on Treasury bills is 2.5 percent and the expected return for the market is 9 percent.   Stock Beta K 1.06 G 1.28 B 0.78 U 0.93   ​(Click on the icon    in order to copy its contents into a spreadsheet.​)   a.  Using the​ CAPM, what rates of return should Grace require for each individual​ security? b.  How would your evaluation of the expected rates of return for Grace change if the​ risk-free rate were to rise to 4 percent and the market risk premium were to be only 6 ​percent? c.  Which market risk premium scenario​ (from part a or b​) best fits a recessionary​ environment? A period of economic​ expansion? Explain your response.       Question content area bottom Part 1 a.  The expected rate of return for security​ K, which has a beta of 1.06​, is enter your response here​%. ​(Round to two decimal​ places.) Part 2 The expected rate…

Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund 10.2% 37% Return Standard deviation…

Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P's allocation between stocks and cash during the period was a constant 97% and 3%, respectively. The risk-free rate of return was 2%. One-Year Trailing Returns Miranda Fund 10.2% 37% Return Standard deviation Beta…

PART A,B and C are completed. need help in D and E. TIA Unique vs. Market Risk. The figure below shows plots of monthly rates of return on three stocks versus the stock market index. The beta and standard deviation of each stock is given besides its plot. A. Which stock is riskiest to a diversified investor? B. Which stock is riskiest to an undiversified investor who puts all her funds in one of these stocks? C. Consider a portfolio with equal investments in each stock. What would this portfolio’s beta have been? D. Consider a well-diversified portfolio made up of stocks with the same beta as Exxon. What are the beta and standard deviation of this portfolio’s return? The standard deviation of the market portfolio’s return is 20 percent. E. What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8 percent. The risk-free rate of interest is 4 percent.