You manage a $10.2 million portfolio, currently all invested in equities, and believe that the...
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You manage a $10.2 million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead, you decide to temporarily hedge your equity holdings with E-mini S&P 500 index futures contracts. a. Should you be long or short the contracts? multiple choice Long Short b. If your equity holdings are invested in a market-index fund, into how many contracts should you enter? The S&P 500 index is now at 1,097 and the contract multiplier is $250. (Round your answer to 1 decimal place.) c. How does your answer to part (b) change if the beta of your portfolio is 0.8? (Round your intermediate calculations and final answer to 1 decimal place.)
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