A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts AssetExpected Return (%)BetaResidual Standard Deviation (%) Stock A 22 1.4 53 Stock B 21 1.8 61 Stock C 19 0.7 58 Stock D 16 1.1 46 Macro Forecasts AssetExpected Return (%)Standard Deviation (%) T-bills 7 0 Passive equity portfolio 16 20 Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.4647. a. What is the cost of the restriction in terms of Sharpe’s measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) cost of restriction= b. What is the utility loss to the investor (A = 1.9) given his new complete portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts AssetExpected Return (%)BetaResidual Standard Deviation (%) Stock A 22 1.4 53 Stock B 21 1.8 61 Stock C 19 0.7 58 Stock D 16 1.1 46 Macro Forecasts AssetExpected Return (%)Standard Deviation (%) T-bills 7 0 Passive equity portfolio 16 20 Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.4647. a. What is the cost of the restriction in terms of Sharpe’s measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) cost of restriction= b. What is the utility loss to the investor (A = 1.9) given his new complete portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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A portfolio manager summarizes the input from the macro and micro forecasters in the following table:
Micro Forecasts AssetExpected Return (%)BetaResidual Standard Deviation (%) Stock A 22 1.4 53 Stock B 21 1.8 61 Stock C 19 0.7 58 Stock D 16 1.1 46
Macro Forecasts AssetExpected Return (%)Standard Deviation (%) T-bills 7 0 Passive equity portfolio 16 20
Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.4647.
a. What is the cost of the restriction in terms of Sharpe’s measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)
cost of restriction=
b. What is the utility loss to the investor (A = 1.9) given his new complete portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Transcribed Image Text:Cases
Unconstrained
Constrained
Passive
Utility Levels
%
%
%
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