To determine the optimal risky portfolio in the Treynor-Black model, macroeconomic forecasts are used for the _________, and composite forecasts are used for the __________.
A) passive index portfolio; active portfolio
B) active portfolio, passive index portfolio
C) expected return; standard deviation
D) expected return ; beta coefficient
E) alpha coefficient; beta coefficient

Question

Quizplus · Accepted Answer

In the Treynor-Black model, macroeconomic forecasts are used to determine the expected return on the passive index portfolio, while composite forecasts (combining information from various analysts or models) are used to select and weight securities in the active portfolio.

To Determine the Optimal Risky Portfolio in the Treynor-Black Model