Application of CAPM
Two fund managers are comparing performance.
One averaged a 19% return and the other a
16% return. However, the beta of the first fund
was 1.5, while that of the second fund was 0.8.
Which manager had better stock-picking skill
(aside from the issue of general market risk) if
the T-bill rate were 6% and the market return
What the beta of the 1
fund has to be for the
manager to be at par with the 2