Equity Investments 【 Reading 27】 习题精选 2012, regarding, following, statements

Gypsy

Which of the following statements regarding using equities as an inflation hedge is most accurate? They have been a good inflation hedge:

A) in many countries over a short time span.

B) but only in the U.S for a short time span.

C) in many countries over a long time span.

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Using data for 17 countries for 106 years, equities have had consistently positive real returns (i.e., their nominal return has been higher than that of inflation).

keytee

If an investor believes markets are efficient, the investor will pursue a passive strategy. Relative to active and semiactive strategies, passive strategies are characterized by low expected active return, low tracking risk, and low information ratio.

hinsafdar

An investment management firm is preparing to hire an independent analyst to recommend security selections for the firm’s portfolio. The firm would like to keep the manager’s compensation straightforward and predictable. Which of the following best describes the firm’s situation? The investment management firm wants to hire a:

A) sell-side analyst and pay them on ad valorem basis.

B) buy-side analyst and pay them performance-based fees.

C) buy-side analyst and pay them on ad valorem basis.

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Sell-side analysts often work for an investment bank that uses the research to promote stocks the bank is selling. Sell-side research is also conducted by independent firms available for hire by investment managers. Ad valorem fees are straightforward and predictable. This is useful when the investor is budgeting investment fees. Performance-based fees are more complex to administer.

hinsafdar

Which of the following best describes the buy-side equity research approach?

A) Investment recommendations are presented to a committee and the research is not available to the public.

B) Investment recommendations are used to promote stocks and the research is available to the public.

C) Investment recommendations are presented to a committee and the research is available to the public.

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Buy-side equity research is used to formulate investment recommendations for an investment management firm. The analyst usually must present their investment recommendations to and have them approved by a committee. Buy-side research is not usually available to those outside the firm because this is how the firm hopes to establish their competitive advantage.
Sell-side research is often used by an investment bank to promote stocks the bank is selling. It is thus available to the public.

hinsafdar

Jane Andrews has investigated the economic conditions in the country of Semeria and is forecasting an economic expansion. She then investigates the valuations for cyclical stocks in this country. What equity research approach is she using?

A) Bottom-up.

B) A combination of top-down and bottom-up.

C) Top-down.

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Jane is using a combination of top-down and bottom-up. She starts at the country level and after finding attractive economic conditions, she then drops down to the individual stock level to find stocks that are attractive based on their valuations.

hinsafdar

Which of the following would least likely be included in bottom-up equity research?

A) Price-multiple.

B) Dividend yield.

C) Currency forecasts.

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Bottom-up equity research focuses on individual stock valuation so the firm’s dividend yield and price-multiple would likely be included. Currency valuations are at the macroeconomic level and would be less likely to be included in a bottom-up approach.

hinsafdar

If an investor is concerned that his or her equity manager might undertake too much risk, which of the following provisions in the equity manager’s compensation plan should be included?

A) A fee cap.

B) Stock options.

C) A high water mark provision.

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A performance-based fee may include a fee cap where a maximum is placed on the performance fee. The intent is to prevent managers from undertaking too much risk to earn higher fees.

hinsafdar

Which of the following equity manager compensation plans would create the greatest incentive for performance?

A) A base compensation plus bonus and stock options.

B) A base compensation plus stock options.

C) A symmetric compensation plan.

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Performance-based fees align the interests of the equity manager and the investor, especially if they are symmetric. A symmetric compensation plan has both rewards for good performance and punishment for bad performance. Both remaining responses do not punish the manager for bad performance.

hinsafdar

Which of the following provisions in an equity manager’s compensation plan would create symmetry in the compensation?

A) A high water mark provision.

B) A fee cap.

C) Stock options.

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Symmetry refers to when the manager receives both rewards for good performance and punishment for bad performance. A high water mark provision states that a manager must compensate for past underperformance before receiving a performance-based fee. This is the only compensation provision mentioned in the responses that punishes for bad performance so it is the only one that provides symmetry.

hinsafdar

Which of the following is least accurate regarding an alpha and beta separation approach?

A) The alpha position is more costly than the beta position.

B) A portable alpha strategy means that an investor can easily pick up systematic risk through a variety of positions.

C) This approach may obscure investment risks.

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One of the advantages of an alpha and beta separation approach is that the investor can better understand and manage the risks in an alpha and beta separation approach because they are more clearly defined. The investor also has a better idea of the costs of investing. The passive beta exposure is typically cheaper than the active alpha exposure. In a portable alpha strategy, the investor can easily pick up systematic risk through a variety of positions using equity index positions while maintaining the long-short alpha.