You can assume that an Exchange-Traded Fund uses a value-weighted momentum strategy of buying winners and short-selling losers, and limits the universe to large & mid-cap stocks in order to reduce transactions costs. The fund does not use any other tools to mitigate transaction costs. In this case, what is the optimal rebalancing frequency for the momentum strategy? O A. Daily OB. Weekly OC. Monthly O D. Quarterly O E. Semi-annually OF. Annually O G. Momentum is a long-term strategy that does not need to be rebalanced every year.

You can assume that an Exchange-Traded Fund uses a value-weighted momentum strategy of buying winners and short-selling losers, and limits the universe to large & mid-cap stocks in order to reduce transactions costs. The fund does not use any other tools to mitigate transaction costs. In this case, what is the optimal rebalancing frequency for the momentum strategy? O A. Daily OB. Weekly OC. Monthly O D. Quarterly O E. Semi-annually OF. Annually O G. Momentum is a long-term strategy that does not need to be rebalanced every year.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Hedge fund incentive fees are essentially Multiple Choice A straddles. B put options on the portfolio with a strike price equal to the expected future portfolio value. C call options on the portfolio with a strike price equal to the expected future portfolio value. D call options on the portfolio with a strike price equal to the current portfolio value times one plus the benchmark return. Only typed answer and don't use chat gpt
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97. Year 2018 2019 2020 2021 2022 Fund -19.4% 25.1 13.7 7.2 -1.98 Sharpe ratio Treynor ratio Market -37.5% 20.8 13.3 8.4 -4.2 Risk-Free 1% 4 2 6 2 What are the Sharpe and Treynor ratios for the fund? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
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Which of the following statements is false? A. Basel II use the value at risk (VaR) with a one-year time horizon and a 99.9% confidence level for calculating capital for credit risk and operational risk. B. 20 BP = 0.2% C. Basel I is increasing the amount of capital that banks are required to hold and the proportion of that capital that must be equity. D. Model-building approach is a model for the joint distribution of changes in market variables and using historical data to estimate the model parameters.
An investor considers two mutual funds. Based on past experience, the first fund has an expected return of 0.08 and a standard deviation of 0.05. The second fund has an expected return of 0.07 and a standard deviation of 0.06. There is no reason to assume that future performance of these funds will differ from past performance. However, the second fund has a guarantee attached that the return in any year will not be negative.RequiredA. Which fund would a rational investor be likely to buy according to single-person decision theory?B. The investor buys the second fund. Use prospect theory to explain why.
Your Company, manager of the Gigantic Mutual Fund, knows that her fund currently is well diversified and that it has a CAPM beta of 1.0 The risk-free rate is 8% and the CAPM risk premium of 6.2%. She has been learning about measures of risk and knows that there are (at least) two factors: changes in industrial production index, δ1 and unexpected inflation, δ2 The APT equation is E(Ri) – Rf = [δ1 – Rf]bi1 + [δ2 – Rf]bi2, E(Ri) = 0.08 + [0.05]bi1 + [0.11]bi2. Required If she rebalances her portfolio to keep the same expected return but reduce her exposure to inflation to zero (i.e., bi1= 0) what will its sensitivity to the first factor become?
How can a mutual fund manager who follows a momentum trading strategy expect to earn above - average return 1. Provided the stock price has been decreasing below the mean reversion point and other investors follow a mean reversion strategy the fund manager is likely to earn an above average return 2. If the fund manager follows a momentum strategy and buys a stock as the price is increasing while other investors follow a mean reversion strategy, then it is likely the stock price will continue to rise 3. Provided the stock price have been rising above the mean reversion point and other investors follow a mean reversion strategy, the fund manager is likely to earn an above average return 4. If the fund manager follows a momentum strategy and buys a stock as the price is increasing and other investors also follow a momentum strategy, then it is likely the stock price will continue to rise
A risky fund has an expected return of 10% and a standard deviation of 18%. the T-Bill Rate is 5%. An Investor allocates 110% of her retirement portfolio to the risky fund and -10% to T-Bills (recall the negative allocations to T-ills indicates borrowing at the risk free rate) What is the investor's risk aversion coefficient? (PLEASE SHOW WORK!!) A) 2.06 B) -0.71 C) 3.7 D) 1.40
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The following question illustrates the APT. Imagine that there are only two pervasive macroeconomic factors. Investments X, Y, and Z have the following sensitivities to these two factors: Investment b1 b2 X 1.75 0 Y −1.00 2.00 Z 2.00 1.00 We assume that the expected risk premium is 7.8% on factor 1 and 11.8% on factor 2. Treasury bills obviously offer zero risk premium. According to the APT, what is the risk premium on each of the three stocks? Suppose you buy $500 of X and $125 of Y and sell $375 of Z. What is the sensitivity of your portfolio to each of the two factors? What is the expected risk premium? Suppose you buy $200 of X and $150 of Y and sell $100 of Z. What is the sensitivity of your portfolio to each of the two factors? What is the expected risk premium? Finally, suppose you buy $400 of X and $50 of Y and sell $200 of Z. What is your portfolio's sensitivity now to each of the two factors? And what is the expected risk premium?
A mutual fund that aggressively seeks capital growth: # O A. will have an MER that is higher than a global fund. OB. will have an MER that is approximately the same as a T-bill fund. OC. will have an MER that reflects the increased costs of research. OD. will have an MR similar to that of a fixed-income fund.

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