Author Question: George wants to pick a stock for his Diversified Hedge Fund. The fund has holdings in every country ... (Read 33 times)

madam-professor · **on:** Apr 25, 2021

George wants to pick a stock for his Diversified Hedge Fund. The fund has holdings in every country with a stock market. George is trying to decide which asset he should add to his portfolio: Stock A or Stock B. Expected return, Standard deviation and beta values for the two stocks are outlined in the table below. Which stock is best for George's portfolio and why?

	Stock A	Stock B	Risk-Free Asset
Expected Return	8%	12%	5%
Standard Deviation	12%	22%
Beta	1	2

◦ Stock A because it has a lower Beta.
◦ Stock A because it has more return per unit of standard deviation.
◦ Stock B because it has a higher return.
◦ Stock B because it has a higher Treynor Index with respect to standard deviation.
◦ Stock B because it has a higher Treynor Index with respect to Beta.

juicepod · **Reply #1 on:** Apr 25, 2021

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