“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? Why?
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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.”
Do you agree? Why?
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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.“The strong form of the efficient-market hypothesis is nonsense. Look at the T. RowePrice 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.”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 mutual fund manager has a $20 million portfolio with a beta of 0.75. The risk-free rate is 3.75%, and the market risk premium is 7.0%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 12%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places.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,…
- 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 mutual fund manager has a $20 million portfolio with a beta of 2.8. The risk-free rate is 2.5%, and the market risk premium is 5%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 15%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to one decimal place.A mutual fund manager has a $450 million portfolio with a beta of 1.20. The risk-free rate is 2.5%, and the market risk premium is 5.00%. The manager expects to receive an additional $150 million which she plans to invest in several different stocks. After investing the additional funds, she wants to reduce the portfolio's risk level so that once the additional funds are invested the portfolio's required return will be 7.50%. What must the average beta of the new stocks added to the portfolio be (not the new portfolio's beta) to achieve the desired required rate of return?
- 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?If you desire to forecast performance of a mutual fund for next year, the best forecast will be given by the a. geometric average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. both geometric average return and arithmetic average return You buy and hold a S&P 500 index fund. You always reinvest your dividends earned on the fund. Which method provides the best measure of the actual average historical performance of the investments you have chosen? a. both geometric average return and arithmetic average return b. neither geometric average return nor arithmetic average return c. arithmetic average return d. geometric average returnA 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?