Given no information about GDP and population growth, we cannot calculate returns using the detailed model. As such, we fall back on the traditional assumption that the factors and random error in a macroeconomic model are expected to equal zero. As such, the expected return for the portfolio is the weighted average of the intercepts: 65% × 12% = 7.8% and 35% × 18% = 6.3% thus 7.8% + 6.3% = 14.1%. |
