A fund manager

 

 

1. Do Chapter 4 Problem 24 in BKM (P114)

2. Do Chapter 4 Problem 25 in BKM (P115)

3. [Modified BKM Question] Suppose that every time a fund manager trades stock, trans-
action costs such as commissions, bid-asked spreads, and price impact amount to 0:4% of the
value of the trade. If the portfolio turnover rate is 400% per year, by how much is the annual
total return of the portfolio reduced by trading costs?

4. Do Chapter 26 Problem 2 (P902)

5. [Modified BKM Question] True or False. Briefly explain your answers.
a) Because hedge funds often use market neutral strategies (e.g. pairs trading), the risk-free
rate is the best benchmark to use for hedge fund evaluation.
b) Statistical arbitrage always generates a positive trading pro.t.
c) The publicly available data for the analysis of the performance of the average mutual
fund is superior to the publicly available data for the analysis of the performance of the average
hedge fund.

6. Fidelity Magellan Versus Vanguard 500 Index
a) Download the file assignment7data.xls
b) Estimate the historical performance of each fund relative to the 1-factor and 3-factor
models using regressions and include the regression results, but not the original data, in your
homework submission.
c) Based on your results from part b) and any other related considerations, which of these
two mutual funds would you purchase? Briefly explain your answer.

 

 

 

Sample Solution

ily be tracked by monitoring the global sea level heights together with the seafloor morphology and glacial ice mensuration. This is due to the fact that sooner or later the glacial meltwater will end up in the oceans and due to the sped-up melting treated in 3.3 and 3.4, the rate will increase drastically in the future. It is also useful to create models of inundation, coastal erosion and potential storm damage in order to thwart these catastrophes since they are a predictable consequence of sea-level rise (National Research Council 2010, Chuvieco 2008). 3.6 Accumulating natural disasters The last point is the accumulation of extreme events. The USA experiences more and more record high temperatures every year, congruously the record low temperatures occur fewer than ever. However extreme events also include heat waves, droughts, floods, cyclones, and wildfires. Changes in the earth’s system diversity also follow as a response to weather and climate extremes. Species that prove unable to adapt to the new circumstances will ultimately disappear or have to surrender to more successfully adapted species. An increased number of strong blusters with mounting intensity is also an indicator for these extreme events, just like frequent insect infestations. Insects are the profiteers of global changes in wind patterns and/or sea level rise, as they can be transported great distances into regions usually not inhabited by them (Dukes 2009). Global changes can also cause epidemic diseases dangerous for humans, as wind and sea can transport disease vectors communicated by insects. Diseases are especially dangerous; As a side effect they result in the attenuation of a population’s resilience and ability to counteract or even respond to climate as well as other stressors. The consequences of such extremes range from the disruption of food production and water supply to increased rates of morbidity and mortality and consequences for the physical and psychological health of human beings (IPCC 2014). There are quite a few ways to survey climatic extremes, as these can be very diverse. In order to monitor severe storms, it is possible to track the annual storm number together with maximum wind speed, geographic storm tracks, precipitation and flash floods. With regard to insect infestations and whether they were dislocated, taking the number of insect infestations, the insect type, the land cover of the infestations, the crop impacts and the historic recurrence into account is helpful. Human diseases can be evaluated by the number and type of epidemics and the impacts they had concerning the fatalities or in general the number hospitalised, the historic recurrence and the geographically affected

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