投资学第10版习题答案08.pdfVIP

投资学第10版习题答案08--第1页 CHAPTER 8: INDEX MODELS PROBLEM SETS 1. The advantage of the index model, compared to the Markowitz procedure, is the vastly reduced number of estimates required. In addition, the large number of estimates required for the Markowitz procedure can result in large a regate estimation errors when implementing the procedure. The disadvantage of the index model arises from the model’s assumption that return residuals are uncorrelated. This assumption will be incorrect if the index used omits a significant risk factor. 2. The trade-off entailed in departing from pure indexing in favor of an actively managed portfolio is between the probability (or the possibility) of superior performance against the certainty of additional management fees. 0 3. The answer to this question can be seen from the formulas for w (equation and 0 w* (equation . Other things held equal, w is smaller the greater the residual variance of a candidate asset for inclusion in the portfolio. Further, we see that 0 regardless of beta, when w decreases, so does w*. Therefore, other things equal, the greater the residual variance of an asset, the smaller its position in the optimal risky portfolio. That is, increased firm-specific risk reduces the extent to which an active investor will be willing to depart from an indexed portfolio. 4. The total risk premium equals: