Arvin is an investment manager who invested 40% of the funds in stocks, 35% in bonds and 25% in money markets and earned 12% returns in stocks, 5% in bonds and 1% in money markets. The manager’s performance is evaluated again a benchmark performance with 50% weight in stocks, 30% in bonds and 20% in money markets. The benchmark returns for stock markets is 11%, 2% for bond markets and 1% for money markets. During this period the manager’s portfolio return had a standard deviation of 22% and the market portfolio return had a standard deviation of 18%, and the average risk-free rate was 2%. Please provide formulas and step by step solutions 1.) Did Prasad over- or under-perform relative to the benchmark and by how much (%)?
Arvin is an investment manager who invested 40% of the funds in stocks, 35% in bonds and 25% in
Please provide formulas and step by step solutions
1.) Did Prasad over- or under-perform relative to the benchmark and by how much (%)?
2.) What were the contributions of Prasad’s asset allocation and security selection to the manager’s relative performance?
3.) What is the value of M2 measure for Prasad’s portfolio?
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