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

Question

Quizplus · Accepted Answer

In the Treynor-Black model, macroeconomic forecasts are used to determine the optimal risky portfolio by influencing the passive index portfolio, while composite forecasts (combining information from various sources including analysts' forecasts, statistical models, etc.) are used for the active portfolio. This approach combines the benefits of passive index investing with the potential for excess returns from active management.

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