Quiz: Core Satellite. percentage, 2011

adehbone

An Investor's portfolio is made up as follows.
40% Passive Index
20% Enhanced Index, .5% Active Return, 1.0% Tracking Risk.
20% Manager A, 1.5% Active Return, 2.5% Tracking Risk
20% Manger B, 3.0% Active Return, 6% Tracking Risk

1.) What percentage of the portfolio is the satellite.
A.) 40%
B.) 50%
C.) 60%

2.) What is the Information Ratio of the Portfolio.
A.) .76
B.) .78
C.) .80



Edited 2 time(s). Last edit at Tuesday, May 24, 2011 at 09:15AM by Paraguay.

justin88

1) 40%
2) I'm getting an IR of .76
Active Return of 1%, Active Risk of 1.32%

bboo

It certainly was. I'm just glad to see I know something.....

Roflnadal

5% Active Return?you mean 0.5% or 5%?

pennyless

[(.2)(.5) + (.2)(1.5) + (.2)(3.0)] / [(.2^2)(1.0^2) + (.2^2)(2.5^2) + (.2^2)(6^2)]^1/2 =

1.0/1.315 = .76

PalacioHill

niraj_a Wrote:
-------------------------------------------------------
> damn good question. is this a shweser product?

I wrote it myself, which is why the answer was screwed up to start.

NakedPuts2011

so what is the right answer for the IR?

IAmNeil

ok, no clue what you are doing in that equation

Colum

mcap11 Wrote:
-------------------------------------------------------
> ok, no clue what you are doing in that equation


Weighted average active return / weighted average deviation assuming uncorrelated active returns.

zwjy

dhwit Wrote:
-------------------------------------------------------
> So, just to confirm... ehnahced index does or does
> not count towards the core? A is 40% (index only)
> and C is 60% (index and enhanced index).

You have the answer backwards. 40% is the satellite via 100-40-20 = 40. 60% is the core.

Pg 257. "The type of portfolio that Nakasone constructed in the previous section is referred to as a core-satellite portfolio. Specifically, 52% of the overall portfolio--THE INDEX AND SEMIACTIVE MANGERS--constitutes the core holding."

Core holding is active and semiactive(enhanced indexing).