Using historical risk premiums from Table 5.5 over the 1927-2018 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio if the current risk-free interest rate is 2.35% ? (Round your answer to 2 decimal places.) Expected annual HPR %
Using historical risk premiums from Table 5.5 over the 1927-2018 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio if the current risk-free interest rate is 2.35% ? (Round your answer to 2 decimal places.) Expected annual HPR %
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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Transcribed Image Text:Using historical risk premiums from Table 5.5 over the 1927-2018 period as your guide, what would be your estimate of the expected
annual HPR on the Big/Value portfolio if the current risk-free interest rate is 2.35% ? (Round your answer to 2 decimal places.)
Expected annual HPR
%
Transcribed Image Text:A. 1927-2018
Mean excess return (annualized)
Standard deviation (annualized)
Sharpe ratio
Lower partial SD (annualized)
Skew
Kurtosis
VaR (1%) actual (monthly) returns
VaR (1%) normal distribution
% of monthly returns more than 3
SD below mean
Expected shortfall (monthly)
B. 1952-2018
Mean excess return (annualized)
Standard deviation (annualized)
Sharpe ratio
Lower partial SD (annualized)
Skew
Kurtosis
VaR (1%) actual (monthly) returns
VaR (1%) normal distribution
% of monthly returns more than 3
SD below mean
Expected shortfall (monthly)
Market Index
8.29
18.52
0.45
21.68
0.19
7.85
-13.61
-11.79
0.94%
- 19.60
7.60
14.76
0.52
17.25
-0.54
1.95
-10.71
-9.28
0.62%
- 18.85
Big/Growth
8.07
18.35
0.44
21.10
-0.11
5.63
-14.48
-11.69
0.75%
- 19.80
7.46
15.37
0.49
17.14
-0.38
1.84
- 10.94
-9.70
0.66%
- 17.78
Big/Value
11.69
24.70
0.47
25.44
1.63
18.43
-19.40
-
- 15.69
0.85%
-23.87
10.04
16.42
0.61
17.60
-0.32
2.25
- 12.26
- 10.19
1.06%
-21.16
Small/Growth
8.99
26.06
0.34
28.95
0.68
7.85
-20.48
-16.80
0.85%
-24.67
7.17
22.13
0.32
23.81
-0.41
2.11
-16.96
-14.26
0.93%
-24.11
Small/Value
15.38
28.21
0.55
26.18
2.18
22.32
-20.57
-17.78
0.57%
-25.33
13.16
18.41
0.71
18.26
-0.34
3.44
-14.97
-11.27
1.19%
-24.45
Table 5.5
Statistics for monthly excess returns on the market index and four "style" portfolios
Source: Authors' calculations using data from Prof. Kenneth French's web site: http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/
data_library.html.
Expert Solution
Introduction
Holding period return (HPR) is the total return received from holding an investment over a specific period of time, including both capital gains or losses and any income received from the investment, such as dividends or interest payments. HPR is expressed as a percentage of the initial investment, and it provides a measure of the investment's performance over the holding period.
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