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The Investment Committee is big on active management, and believes that there are areas/pockets of inefficiencies in the market. Knowing that you have taken Finance 455 at X-University, the Committee asks that you look into constructing an equity portfolio benchmarked to the Dow Jones Industrial Average (DJIA). They would like for you to make an equity portfolio that can be expected to create at least 2% of alpha (above the DJIA) with a tracking error budget of 4% (or stated differently, an Information Ratio of 0.50).
Based on that information, and with the Excel Spreadsheet given (showing historical return data for the DJIA component stocks), design a portfolio that can yield a 2% enhance in expected return over the benchmark (alpha), with a maximum of 4% tracking error (Information Ratio at least 0.50).
What is Industry Risk An industry may be viewed as group of companies which compete with each other to market a homogeneous product. Industry risk is that portion of an inv
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1. You are given the following long-run annual rates of return for alternative investment instruments: US Government T-Bills 3.5% Large-cap common stocks 12.1% Long-
Determine about the Liquidity Risk Liquidity risk is the risk associated with specific secondary market in which a security trades. An investment which can be bought or sold
Using the above information, and any other information (state assumptions), create the start of a risk register for the project, using the Risk Register Sample below as a guide. Id
a. What is unsystematic risk? How is it different from systematic risk? Describe the sources of unsystematic risk. What will the required rate of return be when the level of system
Problem: (a) Describe the difference between risk and uncertainty. Give an example to illustrate your answer. (b) Name three common measures of risks and outline their p
Here is a basic risky decision problem: Using the template below, sketch the results of a sensitivity analysis on P(Deal Succeeds) for a risk-neutral decision maker. How hi
explain LIBOR
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