In the Treynor-Black model,the weight of each analyzed security in the portfolio should be proportional to its __________.
A) alpha/beta
B) alpha/residual variance
C) beta/residual variance
D) none of the above

Question

Quizplus · Accepted Answer

In the Treynor-Black model, the weight of each analyzed security in the portfolio is proportional to its alpha divided by its residual variance. This helps in determining the contribution of each security to the portfolio's overall performance.

In the Treynor-Black Model,the Weight of Each Analyzed Security in the Portfolio