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LOS m: Compare and contrast long-short versus long-only investment strategies, including their risks and potential alphas, and explain why greater pricing inefficiency may exist on the short side of the market.
Q1. Which of the following are advantages of a long-short trade? A long-short trade focuses on:
A) exploiting constraints and can generate a symmetric distribution of active returns.
B) fundamental valuation and can generate an asymmetric distribution of active returns.
C) exploiting constraints and can generate an asymmetric distribution of active returns.
Q2. Which of the following is characteristic of a long-short trade? A long-short trade has the potential to earn:
A) two alphas and eliminate systematic risk.
B) two alphas and eliminate unsystematic risk.
C) one alpha and eliminate systematic risk.
Q3. Which of the following is least likely to be a reason pricing inefficiencies exist on the short-side?
A) There are more potential buyers than sellers of stock.
B) The securities exchanges in the developed world prohibit short sales.
C) Management has options in firm’s stock.
Q4. A recession is expected in an economy within the next year. Portfolio Manager A has shifted more of their stocks from the financial industry to the health care industry. Portfolio Manager B has shifted more of their stocks from the technology industry to the utility industry. Which of the following statements is most accurate regarding the performance of each manager?
A) Portfolio Manager A is expected to underperform the broad market while Portfolio Manager B is expected to outperform the broad market.
B) Portfolio Manager A is expected to outperform the broad market and Portfolio Manager B is expected to outperform the broad market.
C) Portfolio Manager A is expected to outperform the broad market while Portfolio Manager B is expected to underperform the broad market. | 
发表于 2009-3-6 17:54
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