YYYYMM Return(Stk1) Return(Stk2) Return(Market) Return(T-bill) 201701 7.75% 3.00% 6.18% 0.20% 201702 1.27% 2.12% 1.63% 0.20% 201703 7.63% 1.50% 1.56% 0.15% 201704 9.25% -1.01% 2.09% 0.30% 201705 10.20% 2.66% 4.25% 0.30% 201706 4.33% 2.59% 0.41% 0.30% 201707 12.25% 10.41% 6.05% 0.35% 201708 4.98% -2.94% 2.37% 0.45% 201709 2.19% -1.69% -1.49% 0.20% 201710 4.05% 3.43% 2.51% 0.20% 201711 13.78% 8.29% 3.30% 0.15% 201712 2.01% 1.96% 2.54% 0.30% 201801 14.19% 23.60% 9.92% 0.30% 201802 -6.77% -4.18% -6.21% 0.55% 201803 -5.23% -10.14% -2.44% 0.60% 201804 -4.54% 1.93% 2.38% 0.20% 201805 2.32% -1.32% -1.10% 0.20% 201806 -1.35% -7.01% -4.97% 0.15% 201807 -9.80% -1.86% -1.29% 0.30% 201808 -4.28% -1.95% -2.43% 0.30% 201809 -4.94% 0.27% -0.36% 0.75% 201810 -17.39% -7.14% -10.11% 0.30% 201811 16.85% 9.62% 6.11% 0.55% 201812 0.64% -0.61% -2.49% 0.60% 201901 10.19% 7.68% 8.11% 0.20% 201902 -2.95% 10.90% 2.47% 0.20% 201903 7.50% 2.26% 1.46% 0.20% 201904 7.48% -0.59% 2.23% 0.20% 201905 -15.75% -8.31% -9.42% 0.15% 201906 8.16% 10.59% 6.10% 0.30% 201907 4.42% -3.70% -2.68% 0.30% 201908 -11.79% -8.26% -7.39% 0.55% 201909 1.66% -4.17% 1.43% 0.15% 201910 -2.85% 6.52% 3.12% 0.15% 201911 3.43% 0.90% -2.08% 0.15% 201912 13.20% 2.35% 7.00% 0.15% Suppose that you form an equal-weighted portfolio from stocks Stk1 and Stk2. Which answer is the closest value to the abnormal return (alpha) on the portfolio?

YYYYMM Return(Stk1) Return(Stk2) Return(Market) Return(T-bill) 201701 7.75% 3.00% 6.18% 0.20% 201702 1.27% 2.12% 1.63% 0.20% 201703 7.63% 1.50% 1.56% 0.15% 201704 9.25% -1.01% 2.09% 0.30% 201705...

YYYYMM	Return(Stk1)	Return(Stk2)	Return(Market)	Return(T-bill)
201701	7.75%	3.00%	6.18%	0.20%
201702	1.27%	2.12%	1.63%	0.20%
201703	7.63%	1.50%	1.56%	0.15%
201704	9.25%	-1.01%	2.09%	0.30%
201705	10.20%	2.66%	4.25%	0.30%
201706	4.33%	2.59%	0.41%	0.30%
201707	12.25%	10.41%	6.05%	0.35%
201708	4.98%	-2.94%	2.37%	0.45%
201709	2.19%	-1.69%	-1.49%	0.20%
201710	4.05%	3.43%	2.51%	0.20%
201711	13.78%	8.29%	3.30%	0.15%
201712	2.01%	1.96%	2.54%	0.30%
201801	14.19%	23.60%	9.92%	0.30%
201802	-6.77%	-4.18%	-6.21%	0.55%
201803	-5.23%	-10.14%	-2.44%	0.60%
201804	-4.54%	1.93%	2.38%	0.20%
201805	2.32%	-1.32%	-1.10%	0.20%
201806	-1.35%	-7.01%	-4.97%	0.15%
201807	-9.80%	-1.86%	-1.29%	0.30%
201808	-4.28%	-1.95%	-2.43%	0.30%
201809	-4.94%	0.27%	-0.36%	0.75%
201810	-17.39%	-7.14%	-10.11%	0.30%
201811	16.85%	9.62%	6.11%	0.55%
201812	0.64%	-0.61%	-2.49%	0.60%
201901	10.19%	7.68%	8.11%	0.20%
201902	-2.95%	10.90%	2.47%	0.20%
201903	7.50%	2.26%	1.46%	0.20%
201904	7.48%	-0.59%	2.23%	0.20%
201905	-15.75%	-8.31%	-9.42%	0.15%
201906	8.16%	10.59%	6.10%	0.30%
201907	4.42%	-3.70%	-2.68%	0.30%
201908	-11.79%	-8.26%	-7.39%	0.55%
201909	1.66%	-4.17%	1.43%	0.15%
201910	-2.85%	6.52%	3.12%	0.15%
201911	3.43%	0.90%	-2.08%	0.15%
201912	13.20%	2.35%	7.00%	0.15%

Suppose that you form an equal-weighted portfolio from stocks Stk1 and Stk2. Which answer is the closest value to the abnormal return (alpha) on the portfolio?

Jun 04, 2022

SOLUTION.PDF

YYYYMM Return(Stk1) Return(Stk2) Return(Market) Return(T-bill) 201701 7.75% 3.00% 6.18% 0.20% 201702 1.27% 2.12% 1.63% 0.20% 201703 7.63% 1.50% 1.56% 0.15% 201704 9.25% -1.01% 2.09% 0.30% 201705...

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