EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
expand_more
expand_more
format_list_bulleted
Question
Chapter 26, Problem 4PS
Summary Introduction
To select:
In the performance evaluation of hedge funds, the most relevant statement for explaining problems of survivorship bias and backfill bias.
Introduction:
Survivorship bias means non-performing securities are excluded and reported which lead to a change in an index.
Backfill bias means performing securities included and reported in the index which leads to change in an index.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
An investor who uses only the Treynor ratio to evaluate the performance of a mutual fund is most likely to conclude:
a. Total risk is more important than systematic risk
b. The fund is not well-diversified.
c. A measure of market portfolio performance is essential to evaluate the fund
d. The beta of the fund captures the relevant risk of the fund.
Which of the following regarding the investor sentiment theory of the closed end fund puzzle is FALSE?
a) Investors in closed end funds are not as important an ownership group in the assets of the funds’ investment portfolios.
b) The closed end fund is riskier than the underlying portfolio.
c) Arbitrageurs are subject to limits to arbitrage.
d) The noise trader risk is diversifiable.
One apparent violation of the Law on One Price is the pervasive discrepancy between the prices and net asset value of closed-end mutual funds. Would you expect to observe greater discrepancies on diversified or less diversified funds? Why?
Knowledge Booster
Similar questions
- Why is it harder to assess the performance of a hedge fund portfolio manager than that of a typical mutual fund manager?arrow_forwardWhy 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?arrow_forwardWith respect to hedge fund investing, the net return to an investor in a fund of funds would be lower than that earned from an individual hedge fund because of:a. Both the extra layer of fees and the higher liquidity offered.b. No reason; funds of funds earn returns that are equal to those of individual hedge funds.c. The extra layer of fees only.arrow_forward
- If you knew that you can invest in a passive index fund, at a low cost, and capture all the returns of the market index, would that affect your opinion of the effectiveness of a strategy using technical analysis or fundamental analysis?arrow_forward“If markets are semistrong-form efficient, investors would only adopt passiveinvestment strategies and buy into an index fund, rather than active strategies wherethey would have a portfolio manager select the components of their portfolios andseek for mispriced equities.” Explain if true or notarrow_forwardWhich of the following hedge fund types is most likely to have a return that is closest to risk-free?a. A market-neutral hedge fund.b. An event-driven hedge fund.c. A long/short hedge fund.arrow_forward
- What problems would confront a mutual fund trying to create an index fund tied to an equally weighted index of a broad stock market?arrow_forwardPerformance 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.arrow_forwardStudies or data on mutual performance versus a market index find: Multiple Choice most mutual funds outperform the index. These findings refute the semi-strong efficient markets. most mutual funds outperform the index.These findings refute the strong form of efficient markets. most mutual funds under perform the index.These findings support the semi-strong form of the efficient market. mutual funds are riskless compared to the index.arrow_forward
- How might the constant scrutiny and demand for consistentresults affect the long-term performance of a mutual fund?arrow_forwardIt measures how much rate of return the fund manager/fund generates per unit of systematic risk (beta)? a.PSE b.Jensen Index c.Treynor Index d. Sharpe Indexarrow_forwardHow might the incentive fee of a hedge fund affect the manager’s proclivity to take on high-risk assets in the portfolio?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education