
Explanation:
Portfolio A had an unsuccessful stock selection. This is indicated by the negative alpha coefficient of -1.0. The alpha coefficient is a measure of the performance of an investment against a market index or other benchmark which the investment is expected to follow. A negative alpha indicates that the investment has underperformed compared to the benchmark. In this case, the negative alpha for Portfolio A suggests that the stock selection for this portfolio was unsuccessful, as it underperformed compared to its benchmark.
Choice B is incorrect. The statement that both portfolios have no evidence of an attempted timing is not accurate. Portfolio A has a timing coefficient of 0.05, which indicates some level of attempted timing, even though it may not be significantly successful.
Choice C is incorrect. There's no evidence to suggest that Portfolio B has successful timing as its timing coefficient is 0. A positive and significant timing coefficient would indicate successful market-timing ability.
Choice D is incorrect. The statement that portfolio B had an unsuccessful stock selection isn't correct because the alpha coefficient for portfolio B was positive (1.75), indicating a successful stock selection strategy.
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Q.2563 A portfolio analyst achieved the following results:
| Portfolio A | Portfolio B | |
|---|---|---|
| α | −1.0 | 1.75 |
| β | 0.5 | 0.6 |
| Timing Coefficient | 0.05 | 0 |
Which of the following is TRUE about the analyst's results?
A
Portfolio A had an unsuccessful stock selection.
B
Both portfolios have no evidence of an attempted timing.
C
Portfolio B has evidence of successful timing.
D
Portfolio B had an unsuccessful stock selection.
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