Would someone help me to understand how the solution got the 2%, 3%, 0%, -4%, and -2%? I literally pulled my hair out for the past two hours. THANK YOU!
[question removed by moderator]
"
It is the return for each stock minus the benchmark return which is 12%. So:
14% - 12% = 2%
15% - 12% = 3%
12% - 12% = 0%
8% - 12% = -4%
10% - 12% = -2%
How do you know the benchmark return is 12%? Is it because Stock 3’s portfolio weight and benchmark weight are both at 20% and its 2016 return is 12%?
But how can one stock’s return be the same as the benchmark’s portfolio return?