(0 points) Let\'s pretend you work in an environment where the CAPM (Capital Ass
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(0 points) Let's pretend you work in an environment where the CAPM (Capital Asset Pricing Model) is utilized. You are asked several questions by your supervisor regarding the outcome of the model results. You ran the model for a variety of equities (stocks), using the S&P500; as the market variable and using a 6-month Treasury Bill as the risk free rate. The data was collected in terms of months. Suppose you ran this model recently 13. (April 2016). Please keep your answers short and clean. (a) "Thanks for looking into this data for me. I noticed that for For several equity investments, we had results that indicated positive 'alpha' score and several of them had a negative 'alpha' score. Can you please explain whether we would have any preference betweeExplanation / Answer
A) Here positive alpha score is important and negative alpha score is bad, So yes i would go with investments which have positive alpha score,
B) Yes, The values must be compared with similar portifolios in the same time period different time period comparision is a mistake
C) Beta is nothing but risk with the investment, If higher the beta sometimes higher the returns, but also you risk loosing your money with abnormal results. So lower beta stocks are much better.
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