Q: What is a benchmark and why is there a need to compare the fund's return vis-a-vis a benchmark?
A: Benchmark is considered as a standard against which the actual performances of the securities are…
Q: What probable emotional reactions will have to an adverse financial outcome?
A: Emotions in stock market:- Money motivates stock market investors, and it's not uncommon for people…
Q: Funds management efficiency Operating efficiency ratio
A: Part 1 Fund Management Efficiency = Total assets / Total Equity Capital…
Q: What does a failed net-investment test indicate?
A: Answer: Net investment test: The company will not overdraw at any stage on its return, and is thus…
Q: How does an index fund differ from an actively managed fund?
A: An index fund and actively managed fund are different investment vehicles. They have been explained…
Q: Is a method of screening out in certain situations an unacceptable investment alternative?
A: Capital budgeting is the technique that is used in business to determine the best investment…
Q: How do simulation analysis and scenario analysis differ in the way theytreat very bad and very good…
A: The process to evaluate different probable events and their outcomes that is end result of a project…
Q: Which of the following statements is incorrect regarding a fund's size? a.Fund size increases…
A: An investment fund is defined as the investment of the funds with the investors with the purpose of…
Q: c) Calculate Jensen's measure of performance for Wildcat Fund. d) Assuming that the Wildcat fund…
A: Jensen's measure of performance for Wildcat Fund is calculated with the help of following formula…
Q: What factors can contribute to unsuccessful budgeting? How can these situations be avoided?
A: Introduction: Budgeting is a collection of tasks done to plan a budget. A budget is a quantitative…
Q: Why is budgeting assumptions not always accurate and others focuses on one area only like finance?
A: Budgeting assumptions are expectations typically expected or presumed income and expenses that are…
Q: When researching fund managers, which of the following statements is CORRECT? A) You would generally…
A: A person who is responsible for managing portfolios for their client and is responsible for all the…
Q: What's the difference between the two analysis approach used by a portfolio manager in determining…
A: INTRODUCTION: A portfolio is a grouping or assortment of stocks. A shareholder may own a single…
Q: What does the term “risk” mean in the context of capital budgeting; to what extent can risk be…
A: Capital budgeting is a process whereby a firm or an investor evaluates all the long-term…
Q: why would it be wise for a financial manager to learn advanced capital budgeting techniques?
A: Capital budgeting is a technique to evaluate various investment opportunities. Capital budgeting…
Q: What information is considered a necessary evil in constructing an investment policy statement?
A: Provide appropriate guidance on portfolio construction and management Maintain focus on the…
Q: Who are the primary professionals that an organization should use in formulating the risk financing…
A: Risk financing refers to a process which helps an organization to align the business risks in order…
Q: How will a decrease in time preferences affect the loanable funds market? A. There will be an…
A: Decrease in time preferences tells us that individuals in the economy are more patient and more…
Q: Managed funds are often categorised by the type of investments purchased by the fund. These include…
A: An investor is someone who invests money in the hopes of making a profit or gaining an advantage in…
Q: Is funding a type of risk?
A: Funding means providing the funds to the party and charging interest rates from them. Firms need…
Q: Finance is a science that studies the management of funds and the relationship of time, money and…
A: Finance can simply be referred to as the management of money and investment in an individual's…
Q: What is the shortcoming of using peer group performance comparisons to judge performance of a fund?…
A: Peer group comparisons are the method of comparing a stock with similar stock in the same sector.…
Q: Why might DCF techniques not lead to proper capital budgeting decisions?
A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…
Q: How would you recognize the importance of using contingency funds for cost estimation, budgeting and…
A: Contingency funds are additional funds that a company would set aside to meet any cost of potential…
Q: human weaknesses under both money planning and life planning
A: Money Planning An individual's current financial condition, long-term financial goals, and plans for…
Q: What is the relationship of risk to the investment?
A: There is a direct relationship between risk and return in investment decision making. It means…
Q: Based on the Sharpe ratio, which fund displays superior performance?
A: Sharpe Ratio is the excess return per unit of the risk. Sharpe Ratio=Expected Return-Risk Free…
Q: Description Activist funds need to devore more time and resources o invastments compared to most…
A: The question is based on the concept of a special investment strategy used in a hedge fund manager.…
Q: In choosing where to invest, return and risk for an investment must be compared. It is not…
A: Return and risk are the different sides of the same coin. Both are directly related to each other.…
Q: biases seriously affect investor's analysis and investment decisions? How
A: Behavioural biases are nothing but irrational behaviour or beliefs that can subconsciously affect…
Q: xplain why it is important to understand that capital budgeting is subject to the validity of the…
A: Capital budgeting and its tools like NPV, IRR etc. are highly important when we decide to determine…
Q: Is the investment risk concerned with the range of possible outcomes from aninvestment?
A: For a business, there are many types of risks associated with it. Some of the risks are credit risk,…
Q: Determine the decision nature of each of the following issues: What are…
A: There are different types of decision which a firm is required to take which includes investing…
Q: Explain how a fund manager should rotate its portfolio to capitalize on peaks, contraction, trough…
A: Portfolio rotation is a business strategy in which a fund manager channelizes securities in and out…
Q: How do you find historical returns and benchmarks on different funds?
A: Historical returns are based on the historical data of the company which portrays how the security…
Q: or example you need money from outside and that's why you are looking for the best options of…
A: Answer
Q: What are the two best reasons for considering a load fund? A. Lack of good no-load funds and…
A: Funds are an alternative of making direct investment where investors purchases units of a selected…
What are the consequences of using a poor benchmark to
evaluate a fund manager?
Step by step
Solved in 2 steps
- What is the shortcoming of using peer group performance comparisons to judge performance of a fund? A) The fund manager’s investment objectives may be more meaningful than its peers. B) The fund manager’s investment objectives may be more cash dominant than its peers. C) The fund manager’s investment objectives may be the same as its peers. D) The fund manager’s investment objectives may be narrower or wider than its peers.Performance evaluation allows us to assess the performance of fund managers going beyond historical returns. In particular, we recognize that risk is anhinportant factor when assessing the performance of fund managers and hence it should be taken into account when evaluating fund managers. However,there are many measures used to assess this risk adjusted performance.a. Identify circumstances in which the Sharpe and Treynor indices can provide conflicting fund rankings and discuss why this is the case.b. Describe Jensen's alpha and the Carhart (1997) model.c. Describe how the information ratio is calculated and what it attempts to measure.Answered with short words. Please be specific: What are the limitations/problems from classifying performance using raw returns? and, What are the limitations of using Sharpe Ratio to classify fund performance?
- What are the advantages of evaluating fund performance based on Internal Rate of Return (IRR)? Why would an investor prefer to evaluate a fund based on a cash-on-cash return?What are the two best reasons for considering a load fund? A. Lack of good no-load funds and superior market performance. B. Preference for a particular fund manager or a specialized type of fund. C. Superior market performance and preferential tax treatment. D. Tax-free income and superior fund managers. E. No management fees rand a particular fund manager.a) How do financial institutions reduce monitoring costs associated with the flow of funds from fund suppliers to fund investors?
- When researching fund managers, which of the following statements is CORRECT? A) You would generally expect the qualitative findings to be reflected in the quantitative results. B) You would generally expect the qualitative findings to conflict with the quantitative results. C) You should look at the qualitative findings separately to the quantitative results. D) You should test qualitative and quantitative results with sensitivity analysis.Why is it so hard for actively managed funds to generate higher rates of return than passively managed index funds having similar levels of risk? Is there a simple way for an actively managed fund to increase its average expected rate of return?Description Activist funds need to devore more time and resources o invastments compared to most other fund strategies. What sdded risk doss this produce for sctivist funds?View Solution:
- what are the key characteristics of active fund management and passive fund management, focusing on how the objectives of active management differ from those of passively managed funds.Calculate: Funds management efficiency Operating efficiency ratio What strengths and weaknesses are you able to detect in SME’s performance?When using the information ratio to compare the performance of two fund managers, all else being equal, which of the following would you select? A) The fund manager with a positive information ratio. B) The fund manager with a negative information ratio. C) The fund manager with the lowest information ratio. D) The fund manager with the highest information ratio.