Assume that residual returns are uncorrelated, and that we will use an optimizer to maximize risk- adjusted residual return. Using the data in Table 10.3, what asset will the optimizer choose as the largest positive active holding? How would that change if we had assigned a = 1 for buys and a = - 1 for sells?
Text Book: Active Portfolio Management, 2/E By Grinold.o Management, 2/E By Grinold.