Question

In: Finance

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.

Solutions

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.


Related Solutions

Two competing commercial banks situated in the same region have comparable asset portfolios, but one operates...
Two competing commercial banks situated in the same region have comparable asset portfolios, but one operates with a total capital ratio of 10%, while the other operates with a ratio of 12%. Compare the opportunities and risk profiles of the two banks.
If an investment analysis would like to test if two portfolios have the same volatility, which...
If an investment analysis would like to test if two portfolios have the same volatility, which test can be used? a.) F test b.) Z test c.) T test d.) Chisq test
Here are the expected returns and risks of two portfolios – a domestic and a foreign:...
Here are the expected returns and risks of two portfolios – a domestic and a foreign: E(r domestic) = 12% σdomestic = 10% E(r foreign) = 16%   σforeign = 12% a. Assume a correlation of 0.5 and draw all the portfolios made up of the two assets in an Expected Return/Risk graph. b. Repeat the procedure in part (a) assuming a correlation of -1, 0, and +1. c. Looking at the four graphs, what do you conclude about the importance...
Here are the expected returns and risks of two portfolios – a domestic and a foreign:...
Here are the expected returns and risks of two portfolios – a domestic and a foreign: E(r domestic) = 12% σdomestic = 10% E(r foreign) = 16%   σforeign = 12% a. Assume a correlation of 0.5 and draw all the portfolios made up of the two assets in an Expected Return/Risk graph. b. Repeat the procedure in part (a) assuming a correlation of -1, 0, and +1. c. Looking at the four graphs, what do you conclude about the importance...
Joe is attempting to evaluate two possible portfolios consisting of the same five assets but held...
Joe is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. She is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data        Portfolio Weights   Asset   Asset Beta   Portfolio A   Portfolio B 1 1.25   12% 29% 2 0.67   30%   10% 3 1.29   6%   19% 4 1.13   11%   22% 5 0.87   41%   20%    Total   100%   100% .a. Calculate the...
Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets but...
Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. She is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data. Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.3 10% 30% 2 0.7 30% 10% 3 1.25 10% 20% 4 1.1 10% 20% 5 0.9 40% 20% Total 100% 100%
Two spheres have the same diameter and mass, but one is solid and the other one...
Two spheres have the same diameter and mass, but one is solid and the other one is hollow. Assuming homogeneous densities and putting the origin at the center, calculate the inertia tensor of each sphere.
Rose Berry is attempting to evaluate two possible? portfolios, which consist of the same five assets...
Rose Berry is attempting to evaluate two possible? portfolios, which consist of the same five assets held in different proportions. She is particularly interested in using beta to compare the risks of the? portfolios, so she has gathered the data shown in the following ?table: LOADING... . a. Calculate the betas for portfolios A and B. b.??Compare the risks of these portfolios to the market as well as to each other. Which portfolio is more? risky? ASSET ASSET BETA PORTFOLIO...
P5.29 Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets...
P5.29 Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. She is particularly interested in using beta to com- pare the risk of the portfolios and, in this regard, has gathered the following data. Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.3 10% 30% 2 0.7 30% 10% 3 1.25 10% 20% 4 1.1 10% 20% 5 0.9 40% 20% Total 100% 100% a. Calculate the...
Please describe the Security Market Line (SML).  Assets or portfolios that have risk-adjusted returns that are different...
Please describe the Security Market Line (SML).  Assets or portfolios that have risk-adjusted returns that are different from those on the SML will converge on the SML?  Why?  Please give two examples.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT