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周教授CFA金融课程:2021年CFA一二三级系列课程
Which of the following is least likely to be a step in the construction of a custom security-based benchmark?
A)
Use the same assets for the benchmark as the manager.
B)
Rebalance the portfolio on a periodic basis.
C)
Minimize misfit risk for the benchmark.



Misfit risk results from differences between the manager’s normal portfolio and the broader asset class benchmark. In a custom security-based benchmark, there will be and should be misfit risk if the manager’s style is different than the broad market and if the custom benchmark accurately reflects the manager’s style.

TOP

Which of the following best describes the impact of survivorship bias on using manager universes as benchmarks?
A)
As consistently underperforming funds are terminated by the fund sponsors, the surviving funds shrink in number such that in a fairly short period of time the number of funds is too small to allow meaningful benchmarking.
B)
Fund sponsors will terminate underperforming managers, underperforming accounts will not survive, and the median will be biased upwards.
C)
Fund sponsors are reluctant to terminate underperforming funds, these accounts survive in the benchmark, and the median will be biased downwards.



The evidence is clear. Fund sponsors will rationally terminate underperforming managers, underperforming accounts will not survive, and the median will be biased upwards. Fund sponsors demonstrate little appetite for underperforming accounts and they are quickly removed.

TOP

Fund Sponsors often use the median account in a particular universe of account returns as an appropriate benchmark. This form of benchmark has a number of drawbacks. Which of the following is NOT a drawback that would be associated with using the median account as a benchmark?
A)
It is virtually impossible to identify the median manager in advance.
B)
It is not measurable as its value cannot be determined on a reasonably frequent basis.
C)
As the median manager is unknown, the measure is ambiguous.



There are seven properties of a valid benchmark. With regard to the median account approach, its value is measurable. This is probably the only criteria that the median manager approach satisfies. The other statements are true of the median account.

TOP

Which of the following best characterizes manager universes as a benchmark? Manager universes:
A)
are a valid benchmark because they are measurable.
B)
are not a valid benchmark because they are not measurable.
C)
are not a valid benchmark because they are not investable.



Manager universes are not a valid benchmark because they are not investable, are not specified in advance, and are not unambiguous. It is also impossible to determine if they are appropriate due to the ambiguity of the median manager. Furthermore, the performance records of poor managers are dropped from manager universes so there is an upward bias (i.e., survivorship bias) where the median manager’s return is inflated. The only property of a valid benchmark that manager universes fulfill is that they are measurable.

TOP

Consider the following relationships:

A = P – B
S = B – M

where:
A = the management’s active management decisions
P = the investment manager’s portfolio return
B = the benchmark return
S = the manager’s investment style
M = the market index

In the context of systematic bias which of the following outcomes is most desirable?
A)
A manager's active returns should be positively correlated with the manager’s investment style.
B)
A manager’s active returns should be negatively correlated with the manager’s investment style.
C)
A manager’s active returns should be uncorrelated with the manager’s investment style.



A manager’s active returns should be uncorrelated with the manager’s investment style.

TOP

Which of the following statements with regard to tests of benchmark quality is CORRECT?
A)
Tracking error is defined as the variance of the excess returns earned due to active management.
B)
An active position is the difference between the weight of a security in the managed portfolio versus the benchmark.
C)
An account’s exposure to systematic risk should be similar to those of the benchmark at all times.



Tracking error is defined by standard deviation not variance. Exposure to systematic risk does not need to be the same at all times rather it should average that of the benchmark. The correct statement is the one in relation to active positions.

TOP

There should be minimal systematic bias in the benchmark relative to the account. Which of the following statements about systematic bias is least accurate?
A)
A beta significantly below one would be ideal as this would indicate that the manager’s account is significantly less risky than the benchmark.
B)
A manager's active decisions should be uncorrelated with the manager’s investment style.
C)
The manager can calculate the historical beta of the account to the benchmark.



Ideally, the manager would be looking for a beta close to one. This would indicate that the portfolio and benchmark are sensitive to the same systematic factors, which would be a desirable characteristic. If the beta differs significantly from one, the benchmark may be responding to a different set of factors, which is not a desirable characteristic of a benchmark.

TOP

With regard to the use of value added return in the measurement of hedge fund performance, which of the following statements is most accurate?
A)
Although weights sum to zero a return is calculated by summing the performance impacts of the individual long positions.
B)
Value added return is simply the difference between the portfolio return and the benchmark return.
C)
Value added return is calculated as the difference between the portfolio return, given benchmark weightings, and the actual portfolio return.



To replicate a zero net asset hedge fund the weights must add to zero. Calculation of return is achieved by summing the individual long and short positions and the value added return is the difference between the portfolio return and the benchmark return.

TOP

The Sharpe ratio has become a commonly used performance measure for hedge funds. Which of the following statements in relationship to the use of the Sharpe ratio in the assessment of hedge fund performance is least accurate?
A)
The Sharpe ratio is the excess returns to the volatility encountered in earning them.
B)
A hedge fund’s Sharpe ratio can be compared to that of a universe of similar hedge funds.
C)
The use of derivatives positions in a hedge fund removes most of the skewness in returns making the use of standard deviations appropriate.



It is clear that for a significant number of hedge funds returns demonstrate a significant degree of skewness often created by the use of derivative positions. The other statements are correct.

TOP

Which of the following would be regarded as the least appropriate method to measure the performance of a hedge fund?
A)
The Sharpe ratio.
B)
Separate long/short benchmarks.
C)
Relative performance comparisons with traditional benchmarks.



Construct a separate long and short benchmark, which can then be combined together in their relevant proportions. The Sharpe ratio compares the return to risk free rather than a benchmark. Relative performance using traditional benchmarks is the least appropriate given hedge funds concentration on absolute returns and the lack of reliable traditional benchmarks.

TOP

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上一主题:Portfolio Management and Wealth Planning【Session17 - Reading 42】
下一主题:Portfolio Management and Wealth Planning【Session16 - Reading 40】