28.
Statistical arbitrage is a version of a ______ strategy.
29.
______ uses quantitative techniques and often automated trading systems to seek out
many temporary misalignments among securities.
30.
Assume that you manage a $3 million portfolio that pays no dividends and has a beta of
1.45 and an alpha of 1.5% per month. Also, assume that the risk-free rate is 0.025% (per
month) and the S&P 500 is at 1,220. If you expect the market to fall within the next 30
days you can hedge your portfolio by ______ S&P 500 futures contracts (the futures
contract has a multiplier of $250).
31.
Assume that you manage a $1.3 million portfolio that pays no dividends and has a beta of
1.45 and an alpha of 1.5% per month. Also, assume that the risk-free rate is 0.025% (per
month) and the S&P 500 is at 1,220. If you expect the market to fall within the next 30
days you can hedge your portfolio by ______ S&P 500 futures contracts (the futures
contract has a multiplier of $250).
32.
Assume that you manage a $2 million portfolio that pays no dividends and has a beta of
1.25 and an alpha of 2% per month. Also, assume that the risk-free rate is 0.05% (per
month) and the S&P 500 is at 1,300. If you expect the market to fall within the next 30
days you can hedge your portfolio by ______ S&P 500 futures contracts (the futures
contract has a multiplier of $250).
33.
Assume that you manage a $2 million portfolio that pays no dividends and has a beta of
1.3 and an alpha of 2% per month. Also, assume that the risk-free rate is 0.05% (per
month) and the S&P 500 is at 1,500. If you expect the market to fall within the next 30
days you can hedge your portfolio by ______ S&P 500 futures contracts (the futures
contract has a multiplier of $250).
34.
Market neutral bets can result in ______ volatility because hedge funds use ______.
35.
Hedge funds exhibit a pattern known as a
36.
______ bias arises because hedge funds only report returns to database publishers if they
want to.
37.
______ bias arises when the returns of unsuccessful funds are left out of the sample.
38.
Performance evaluation of hedge funds is complicated by
39.
The previous value of a portfolio that must be reattained before a hedge fund can charge
incentive fees is known as a
40.
The typical hedge fund fee structure is
41.
Hedge fund incentive fees are essentially
42.
Regarding hedge fund incentive fees, hedge fund managers ______ if the portfolio return is
very large and ______ if the portfolio return is negative.
43.
Hedge funds often employ ______ that require investors to provide ________ notice of their
desire to redeem funds.
44.
Pairs trading is associated with
45.
________ refers to sorting through huge amounts of historical data to uncover systematic
patterns in returns that can be exploited by traders.
46.
Hedge fund performance may reflect significant compensation for ________ risk.
47.
A ________ is an investment fraud in which a manager collects funds from clients, claims
to invest those funds on their behalf, reports extremely favorable investment returns, but
in fact uses the funds for his own use.
26–47
48.
Sadka (2010) shows that exposure to unexpected declines in ________ is an important
determinant of average hedge fund returns and that the spreads in average returns across
funds with the highest and lowest ________ may be as much as 6% annually.
Short Answer Questions
49.
Explain the five major differences between hedge funds and mutual funds.