Appropriate benchmark-neutral alpha for stock


Assignment:

You want to construct a portfolio so that all of the alphas are benchmark-neutral. Stock XYZ has a volatility of 40%, an information coefficient of 0.10, an alpha of 60 basis points, and a beta of 1.63. The benchmark has an alpha of 5.7 basis points. The appropriate benchmark-neutral alpha for stock XYZ is:

a. 44.0 basis points

b. 50.7 basis points

c. 54.3 basis points

d. 56.0 basis points

 

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Portfolio Management: Appropriate benchmark-neutral alpha for stock
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