Please help me in solving this problem

parmit68
Posts: 4
Joined: Fri May 04, 2012 11:00 am

Please help me in solving this problem

Postby parmit68 » Sun May 06, 2012 9:03 pm

A portfolio underperformed its benchmark by 2%.what can we say about alpha ?
a. alpha is -2%
b.alpha is definitely negative
c.alpha can be positive or negative

Tags:

suresh.wadhwani2009
Finance Junkie
Posts: 99
Joined: Sat Apr 07, 2012 10:24 am

Re: Please help me in solving this problem

Postby suresh.wadhwani2009 » Sun May 06, 2012 11:18 pm

Dear Parmit,

Jensen alpha = Actual Return - [Rf + Beta (Rm-Rf)]

From above equation, you can say safely say that alpha is dependent on Beta. So alpha can be positive or negative as you don't the value of Beta.

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Please help me in solving this problem

Postby content.pristine » Mon May 07, 2012 11:08 am

Perfect answer Suresh 8-)


Return to “FRM Part I”



Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.