Questions from General Investment

Q: When estimating a Sharpe ratio, would it make sense to use

When estimating a Sharpe ratio, would it make sense to use the average excess real return that accounts for inflation?

Q: You’ve just decided upon your capital allocation for the next year,

You’ve just decided upon your capital allocation for the next year, when you realize that you’ve underestimated both the expected return and the standard deviation of your risky portfolio by a multipl...

Q: Suppose your expectations regarding the stock market are as follows:

Suppose your expectations regarding the stock market are as follows: Use Equations 5.10–5.12 to compute the mean and standard deviation of the HPR on stocks

Q: The stock of Business Adventures sells for $40 a share.

The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: a. Calculate the expecte...

Q: XYZ stock price and dividend history are as follows: /

XYZ stock price and dividend history are as follows: An investor buys three shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning o...

Q: a. Suppose you forecast that the standard deviation of the market

a. Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in Equation 5.16 is A = 4, what would be a reasonable guess for...

Q: Using the historical risk premiums as your guide, what is your

Using the historical risk premiums as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk-free interest rate is 3%?

Q: Hennessy & Associates manages a $30 million equity portfolio for the

Hennessy & Associates manages a $30 million equity portfolio for the multimanager Wilstead Pension Fund. Jason Jones, financial vice president of Wilstead, noted that Hennessy had rather consistently...

Q: In forming a portfolio of two risky assets, what must be

In forming a portfolio of two risky assets, what must be true of the correlation coefficient between their returns if there are to be gains from diversification? Explain.

Q: A pension fund manager is considering three mutual funds. The first

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a Tbill money market fund that yield...