The strong form of the efficient-market hypothesis is nonsense. Look at the T. Rowe Price Global Technology Fund, which is the best performing mutual fund of the past decade, returning 20.5% annually over the past 10 years, according to Morningstar.”
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“The strong form of the
Price Global Technology Fund, which is the best performing mutual fund of the past decade,
returning 20.5% annually over the past 10 years, according to Morningstar.”
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- “The strong form of the efficient-market hypothesis is nonsense. Look at the T. Rowe Price Global Technology Fund, which is the best performing mutual fund of the past decade, returning 20.5% annually over the past 10 years, according to Morningstar.” Do you agree with this statement? Discuss your point of view.Suppose that Morningstar reports that a mutual fund has earned an alpha of 2.0% per year on average over the last five years. Is this a violation of market efficiency?A good stock-based mutual fund should earn at least 10% per year over a long period of time. Consider the case of Barney and Lynn, who were overheard gloating (for all to hear) about how well they had done with their mutual fund investment. “We turned a $25,000 investment of money in 1982 into $100,000 in 2007.” Solve, a. What return (interest rate) did they really earn on their investment? Should they have been bragging about how investment-savvy they were? b. Instead, if $1,000 had been invested each year for 25 years to accumulate $100,000, what return did Barney and Lynn earn?
- Consider a no - load mutual fund with $ 500 million in assets , 50 million in debt , and 12 million shares at the start of the year , and $ 600 million in assets , 40 million in debt , and 16 million shares at the end of the year . During the year investors have received income distributions of $ 0.50 per share , and capital gains distributions of $ 0.40 per share . Assuming that the fund carries no debt , and that the total expense ratio is 0.90 % , what is the rate of return on the fund ?Investments are made to earn a return, but making investments requires the individual to bear risk. A higher return by itself does not necessarily indicate superior performance. It may simply be the result of taking more risk. Given this context, answer the following two-part questions. A mutual fund generates a 10.8 percent return. During the same period, the market rose by 8.8 percent. If the risk-free rate was 2 percent and the fund had a beta of 1.2 : Did the fund outperform the market? Explain your response.A good stock-based mutual fund should earn at least 10% per year over a long period of time. Consider the case of Barney and Lynn, who were overheard gloating (for all to hear) about how well they had done with their mutual fund investment. “We turned a $25,000 investment of money in 1982 into $100,000 in 2007.” Solve, a. What return (interest rate) did they really earn on their investment? Should they have been bragging about how investment-savvy they were?
- A good stockdash–based mutual fund should earn at least 5% per year over a long period of time. Consider the case of Barney and Lynn, who were overheard gloating (for all to hear) about how well they had done with their mutual fund investment." We turned a $32,500 investment of money in 1982 into $150,000 in 2007." a. What return (interest rate) did they really earn on their investment? Should they have been bragging about how investment-savvy they were? b. Instead, if $1,500 had been invested each year for 25 years to accumulate $150,000, what return did Barney and Lynn earn?In relation to the efficient markets hypothesis, consider the following observations: Mutual fund managers do not on average make superior returns. In any year approximately 50 percent of all pension funds outperform the market. It is possible to make superior returns by buying or selling stocks after the announcement of an abnormal rise in earnings. Managers who trade in their own stocks make superior returns. Which of the following statements is true? I does not provide evidence against semi-strongform efficiency, but II does provide evidence against semi-strong form efficiency. II does not provide evidence against semi-strongform efficiency, but I does provide evidence against semi-strong form efficiency. Both I and II provide evidence against the semi-strongform of market efficiency III provides evidence against semi-strong form efficiency and IV provides evidence against strongform efficiency. III and IV provide evidence against semi-strong form efficiency.You are given the following information concerning several mutual funds: Fund Return in Excess of the Treasury Bill Rate Beta A 12.4% 1.14 B 13.2% 1.22 C 11.4% 0.90 D 9.8% 0.76 E 12.6% 0.95 During the time period, the Standard & Poor's stock index exceeded the Treasury bill rate by 10.5 percent (i.e., r(m) - r(f) = 10.5%) a. Rank the performance of each fund without adjusting for risk and adjusting for risk using the Treynor index. Which, if any, outperformed the market? (Remember, the beta of the market is 1.0.) b. The analysis in part (a) assumes each fund is sufficiently diversified so that the appropriate measure of risk is the beta coefficient. Suppose,…
- Which of the following hypothetical phenomena would be either consistent with or a violation of the efficient market hypothesis? a. Nearly half of all professionally managed mutual funds are able to outperform the S&P 500 in a typical year. Consistent Inconsistent b. Money managers who outperform the market (on a risk-adjusted basis) in one year are likely to outperform the market in the following year. Consistent Inconsistent c. Stock prices tend to be predictably more volatile in January than in other months. Consistent Inconsistent d. Stock prices of companies that announce increased earnings in January tend to outperform the market in February. Consistent InconsistentSuppose that at the beginning of 2004 you invested $l0,000 in the Stivers mutual fund and $5000 in the Trippi mutual fund. The value of each investment at the end of each subsequent year is provided in the table below. Which mutual fund performed better? Year Stivers Trippi 2004 11,000 5,600 2005 12,000 6,300 2006 13,000 6,900 2007 14,000 7,600 2008 15,000 8,500 2009 16,000 9,200 2010 17,000 9,900 2011 18,000 10,600A pension fund is investing $60 million in a well-diversified equity portfolio E and $30 million in a well-diversified bond portfolio B. Total assets under management (portfolio of E and B) has expected return of 8% and standard deviation of 5%. Recently, the fund acquired new capital of $10 million and will use it to invest in a Cryptocurrency portfolio C. C is known to have expected return of 12% and standard deviation of 10%. Also, it is known that the covariance between E and C is 0.8% and the covariance between B and C is 0.4%. What would be the expected return and the standard deviation of the total assets under management (portfolio of E, B and C) when the fund makes this new investment?