You choose to construct a portfolio from the Stock A, Stock…

You choose to construct a portfolio from the Stock A, Stock B, and the risk-free investment. You make the following estimates of the three: Estimates of Alpha, Beta, and Firm-Specific Risk   Alpha Beta Firm-Specific Std Dev Stock A 1.00% 1.25 60.00% Stock B 0.75% 0.80 40.00% Risk-Free Investment 0.00% 0.00 0.00% You invest 45% of your portfolio in Stock A, 45% in Stock B, and the remaining 10% in the risk-free investment. What is your portfolio’s firm-specific risk (standard deviation)?  

You are using the Treynor-Black method to build an optimal r…

You are using the Treynor-Black method to build an optimal risky portfolio. The entire universe of mispriced securities is Stocks A, B, and C. You estimate the following input list for the three: Input List of Investable Universe   Stock A Stock B Stock C Alpha 2.0% 0.7% -0.9% Firm-Specific Risk 40% 60% 90% Beta 1.6 0.5 1.4 What is the initial position in the active portfolio for Stock A?

You choose to construct a portfolio from the Stock A, Stock…

You choose to construct a portfolio from the Stock A, Stock B, and the risk-free investment. You make the following estimates of the three: Estimates of Alpha, Beta, and Firm-Specific Risk   Alpha Beta Firm-Specific Std Dev Stock A 1.50% 1.20 70.00% Stock B 0.75% 1.50 65.00% Risk-Free Investment 0.00% 0.00 0.00% You invest 30% of your portfolio in Stock A, 30% in Stock B, and the remaining 40% in the risk-free investment. What is your portfolio’s alpha?