Two stock investment advisers are comparing performance. The first averaged a 19% rate of return and the second a 16% rate of return. However, the beta of the first investor was 1.5, whereas that of the second investor was 1. (a) Can you tell which investor was a better selector of individual stocks (aside from the issue of general movements in the market)? Explain your answer carefully. (b) If the T-bill rate was 3% and the market return during the period was 15%, which investor would be considered the superior stock selector?
Two stock investment advisers are comparing performance. The first averaged a 19% rate of return and the second a 16% rate of return. However, the beta of the first investor was 1.5, whereas that of the second investor was 1. (a) Can you tell which investor was a better selector of individual stocks (aside from the issue of general movements in the market)? Explain your answer carefully. (b) If the T-bill rate was 3% and the market return during the period was 15%, which investor would be considered the superior stock selector?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Two stock investment advisers are comparing performance. The first averaged a 19%
(a) Can you tell which investor was a better selector of individual stocks (aside from the issue of general movements in the market)? Explain your answer carefully.
(b) If the T-bill rate was 3% and the market return during the period was 15%,
which investor would be considered the superior stock selector?
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