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Two portfolios have the same returns and the same benchmark. One is comprised of private real...

Two portfolios have the same returns and the same benchmark. One is comprised of private real estate investments and one is comprised of real estate securities. Could they have the same: Beta? Alpha? Gamma? Explain.

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Expert Solution

If the two portfolio will be having the similar rate of return in the same benchmark, then they will be having similar Alpha because Alpha is the excess of the rate of return made upon the benchmark rate of return so since both the stock will be having the similar rate of return then they will also be having a similar Alpha.

Both the portfolios even if they are having similar rate of return will not be having similar beta because beta is the volatility of stocks present in the portfolio and a measure of a systematic risk, so beta of two portfolios are not common because they have common rate of return so they will not be having common beta.

Gamma will reflect the rate of change of the options delta and it will also reflect how often the portfolio need to be readjusted according to the changes in the market, so Gamma of these two portfolio will not be similar because they have a similar rate of return as readjustment rate of this portfolio to the market can be different due to their different delta.

jeff jeffy answered 2 years ago
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