Given the monthly returns that follow, find the R2, alpha, and beta of the portfolio. Compute the average return differential with and without sign. Do not round intermediate calculations. Round your answers to two decimal places. R²: Alpha: Beta: % Average return difference (with signs): % Month January February March April May June July August September October November December Portfolio Return 5.7% -2.8 -1.6 2.3 0.8 -0.8 0.5 1.5 -0.4 -3.6 2.3 0.7 S&P 500 Return 5.9% -3.3 -0.8 1.9 0.3 -0.2 0.7 1.6 0.3 -4.1 1.9 0.4

Given the monthly returns that follow, find the R2, alpha, and beta of the portfolio. Compute the average return differential with and without sign. Do not round intermediate calculations. Round your answers to two decimal places. R²: Alpha: Beta: % Average return difference (with signs): % Month January February March April May June July August September October November December Portfolio Return 5.7% -2.8 -1.6 2.3 0.8 -0.8 0.5 1.5 -0.4 -3.6 2.3 0.7 S&P 500 Return 5.9% -3.3 -0.8 1.9 0.3 -0.2 0.7 1.6 0.3 -4.1 1.9 0.4

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 26P

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INV 2 -1 You are considering an investment in a portfolio P with the following expected returns in three different states of nature: Recession Steady Expansion Probability 0.10 0.55 0.35 Return on P -15% 20% 40% The risk-free rate is currently 4%, and the market portfolio M has an expected return of 16% and standard deviation of 20%, and its correlation with P is .7. Is P an efficient portfolio relative to the market?
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INV2 P1 3b You are considering an investment in a portfolio P with the following expected returns in three different states of nature: Recession Steady Expansion Probability 0.10 0.55 0.35 Return on P -15% 20% 40% The risk-free rate is currently 4%, and the market portfolio M has an expected return of 16% and standard deviation of 20%, and its correlation with P is .7. Would you characterize P as a buy or sell and why?
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