Multiple Choice
You manage $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk free rate 2% per quarter and the current value of the S&P 500 index = 1200. You want to exploit positive alpha but you are afraid are afraid that the stock market may fall and want to hedge your portfolio by selling the 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
-When you hedge your stock portfolio with futures contracts the value of your portfolio beta is __________.
A) 0
B) 1
C) 1.2
D) Beta cannot be determined from information given
Correct Answer:
Verified
Correct Answer:
Verified
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