In the Treynor-Black model
A)portfolio weights are sensitive to large alpha values which can lead to infeasible long or short positions for many portfolio managers.
B)portfolio weights are not sensitive to large alpha values which can lead to infeasible long or short positions for many portfolio managers.
C)portfolio weights are sensitive to large alpha values which can lead to the optimal portfolio for most portfolio managers.
D)portfolio weights are not sensitive to large alpha values which can lead to the optimal portfolio for most portfolio managers.
E)none of the above.

Question

Quizplus · Accepted Answer

In the Treynor-Black model, portfolio weights are sensitive to large alpha values which can lead to infeasible long or short positions for many portfolio managers. This is because the model uses a linear programming approach to optimize portfolio weights based on the given inputs, and extreme values (such as large alphas) can result in unrealistic weightings that may not be feasible to implement in practice. Therefore, portfolio managers may need to adjust the alpha values or constraints in the model to ensure that the resulting portfolio is feasible and manageable.

In the Treynor-Black Model