Exam 27: The Theory of Active Portfolio Management

The beta of an active portfolio is .80. The standard deviation of the returns on the market index is 25%. The nonsystematic variance of the active portfolio is 0.03. The standard deviation of the returns on the active portfolio is

Consider the Treynor-Black model. The alpha of an active portfolio is 2%. The expected return on the market index is 12%. The variance of the return on the market portfolio is 0.04. The nonsystematic variance of the active portfolio is 0.02. The risk-free rate of return is 3%. The beta of the active portfolio is 1.15. The optimal proportion to invest in the active portfolio is

An active portfolio manager faces a trade-off betweenI) using the Sharpe measure.II) using mean-variance analysis.III) exploiting perceived security mispricings.IV) holding too much of the risk-free asset.V) letting a few stocks dominate the portfolio.

Consider the Treynor-Black model. The alpha of an active portfolio is 1%. The expected return on the market index is 11%. The variance of return on the market portfolio is 0.06. The nonsystematic variance of the active portfolio is 0.02. The risk-free rate of return is 4%. The beta of the active portfolio is 1.1. The optimal proportion to invest in the active portfolio is

Consider the Treynor-Black model. The alpha of an active portfolio is 1%. The expected return on the market index is 16%. The variance of the return on the market portfolio is 4%. The nonsystematic variance of the active portfolio is 1%. The risk-free rate of return is 8%. The beta of the active portfolio is 1.05. The optimal proportion to invest in the active portfolio is

A purely passive strategy is defined as

A manager who uses the mean-variance theory to construct an optimal portfolio will satisfy

The beta of an active portfolio is 1.36. The standard deviation of the returns on the market index is 14%. The nonsystematic variance of the active portfolio is 0.04. The standard deviation of the returns on the active portfolio is

There appears to be a role for a theory of active portfolio management because

The beta of an active portfolio is .97. The standard deviation of the returns on the market index is 15%. The nonsystematic variance of the active portfolio is 0.03. The standard deviation of the returns on the active portfolio is

If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability

Passive portfolio management consists of

The tracking error of an optimized portfolio can be expressed in terms of the ____________ of the portfolio, and thus reveals ____________.

The beta of an active portfolio is 2.03. The standard deviation of the returns on the market index is 25%. The nonsystematic variance of the active portfolio is 0.06. The standard deviation of the returns on the active portfolio is

The beta of an active portfolio is 1.36. The standard deviation of the returns on the market index is 22%. The nonsystematic variance of the active portfolio is 1.2%. The standard deviation of the returns on the active portfolio is

The beta of an active portfolio is 1.60. The standard deviation of the returns on the market index is 18%. The nonsystematic variance of the active portfolio is 0.05. The standard deviation of the returns on the active portfolio is

The Treynor-Black model requires estimates of

Ideally, clients would like to invest with the portfolio manager who has

To determine the optimal risky portfolio in the Treynor-Black model, macroeconomic forecasts are used for the _________, and composite forecasts are used for the __________.

The Treynor-Black model does not assume that