6. Consider the following performance data for two portfolio managers (A and B) and acommon benchmark portfolio:BENCHMARKMANAGER AMANAGER BReturnWeightWeightWeightReturnReturnStock0.5-4.0%0.6-5.0%0.3-5.0%Bonds0.3-3.50.2-2.50.4-3.50.1Cash0.30.30.30.30.3Evaluation of Asset Managementa. Calculate (1) the overall return to the benchmark portfolio, (2) the overall return toManager A's actual portfolio, and (3) the overall return to Manager B's actual portfo-lio. Briefly comment on whether these managers have under- or outperformed thebenchmark fund.b. Using attribution analysis, calculate (1) the selection effect for Manager A, and (3) theallocation effect for Manager B. Using these numbers in conjunction with your resultsfrom part (a), comment on whether these managers have added value through theirselection skills, their allocation skills, or both.

a) The overall return is calculated as below: Calculation: Answer: Overall bechmark return is…

Answered: 6. Consider the following performance…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio Return Beta σiA 0.15 1.0 0.05B 0.20 1.5 0.10C 0.10 0.6 0.03D 0.17 1.1 0.06Market 0.13 1.0 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio. c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.
The following portfolios are being considered for investment. During the period under consideration, RFR =0.07 Porfolio Return Beta P 0.15 1.00 0.05 Q 0.20 1.50 0.1 R 0.10 0.60 0.03 S 0.17 1.10 0.06 Market 0.13 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio Compute the Treynor measure for each portfolio and the market portfolio Rank the portfolios using each measure explaining the cause for any differences you find in the rankings.
Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio: BENCHMARK MANAGER A MANAGER B Weight Return WEIGHT RETURN WEIGHT RETURN Stock 0.7 -4.7 0.7 -3.8 0.2 -4.7 % Bonds 0.2 -4.0 0.1 -2.2 0.6 -4.0 Cash 0.1 0.3 0.2 0.3 0.2 0.3 Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A’s actual portfolio, and (3) the overall return to Manager B’s actual portfolio. Briefly comment on whether these managers have under- or outperformed the benchmark fund. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Overall return Benchmark % Manager A % Manager B % Using attribution analysis, calculate (1) the selection effect, and (2) the allocation effect for both Manager A and Manager B. Using these numbers in conjunction with your results from Part a, comment on whether these managers have added value…
Consider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.
The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Portfolio Return Beta σi P 0.14 1.00 0.05 Q 0.20 1.30 0.11 R 0.10 0.60 0.03 S 0.17 1.20 0.06 Market 0.12 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R S Market Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R S Market
Consider following information on a risky portfolio, risk-free asset and the market index. What is the Sharpe ratio of the market index? Risky portfolio Risk-free asset Market index Average return 8.2% 2% 6% Std. Dev. 26% 20% Residual std. dev. 10% Alpha 1.4% Beta 1.2
Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
The return, standard deviation, market risk premium and Beta (β) of A, B, C, D and the Market Portfolio and the risk-free interest rate are given in the table below. Find the performance of portfolios (excluding Sortino). portfolio return (rp) risk free interest rate (rf) std. deviation Beta market risk premium (rp- rf) A 18,00 11,00 6,00 1,24 7,00 B 12,00 11,00 2,00 0,87 1,00 C 9,00 11,00 0,50 - 0,73 - 2,00 D 15,00 11,00 3,00 0,46 4,00 Market 13,00 11,00 1,50 1 2,00
Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 7% 0% Market 11.6 28 A 10.0 17 Required: a. Calculate the Sharpe ratios for the market portfolio and portfolio A. (Round your answers to 2 decimal places.) b. If the simple CAPM is valid, is the above situation possible?
You are provided with information regarding the benchmark portfolio and the Alpha managed portfolio as follows: Benchmark Weightings are 50%; 30% and 20% for equity; bonds and cash respectively. Returns are 16%; 9% and 4% for equity; bonds and cash respectively. Alpha managed portfolio Weightings are 70%; 20% and 10% for equity; bonds and cash respectively. Returns are 19%; 11% and 6% for equity; bonds and cash respectively. Determine the performance attributed to asset allocation of the portfolio manager.
As a portfolio manager, you are required to take investment decision from the following two alternative scenarios: (Decision Criterion: Select a portfolio on relative risk basis) Scenario 1: Construct a portfolio with 60% investment in ICC: Expected Return (in %) Risk (as Std Div.) Covariance BPL 12 4 BPL & ICC: -1.2 ICC 7 2 Scenario 2: Construct equal weighted portfolios from following securities Expected Return (in %) Risk (as Std Div.) Covariance PSL 11 5 PSL & IPL: 3.75 IPL 8 3
Determine which one of these three portfolios dominates another. Name the dominatedportfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 14percent and risk of 19 percent. The expected return and risk of Portfolio Yellow are 15 percentand 18 percent; and for the Portfolio Purple are 16 percent and 21 percent.

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