Question

Suppose money manager A has earned an average return of 12% over the past 5 years,...

Suppose money manager A has earned an average return of 12% over the past 5 years, while manager B has earned 8% over that span. The S&P 500 has returned 10% over the same period.  There are 3 possibilities: 1) manager A outperformed manager B; 2) Manager B outperformed manager A; and 3) they performed equally well. Explain each scenario.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution

As a money manager of a hedge manager, it is important to consider performance of the portfolio compared to the market. When considering this performance, it is important to consider performance compared to the market for a long period of time and not just a short time frame. Customers should be aware of the performance of the money managers and make decisions appropriately given their investing return requirements.

Out of the three options, option 1) seems to be the most relevant, that is manager A has outperformed manager B. This is evident by the fact that manager A has experienced a return of 12%, which is above the return of the S&P 500 over the same period, while manager B has experienced a return of 8%. Not only has manager A outperformed manager B, they have also outperformed the market.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 50% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha? a) -2.9% b) -1.3% c) 0.3% d) 1.9% e) 3.5%
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 45% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 45% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
A mutual fund has earned an annual average return of 15% over the last 5 years....
A mutual fund has earned an annual average return of 15% over the last 5 years. During that time, the average risk-free rate was 2% and the average market return was 12% per year. The correlation coefficient between the mutual fund’s and market’s returns was 0.7. The standard deviation of returns was 30% for the mutual fund and 22% for the market. What was the fund’s CAPM alpha?
Your friend is a hedge fund manager. He tells you that he has earned 6% returns...
Your friend is a hedge fund manager. He tells you that he has earned 6% returns on average above the S&P 500 return over the past five years, so he doesn’t believe in efficient market. Do you agree with him? Explain.
Portfolio with a beta of 1.40, Average return of 14% over the last 10 years whereas...
Portfolio with a beta of 1.40, Average return of 14% over the last 10 years whereas the market has only averaged 12% over the same period. Portfolio manager believes she has beaten the market. Risk-free rates is 4%, has the portfolio manager beaten the market. Show work & explain
9. You’ve observed the following returns on Barnett Corporation’s stock over the past five years: -12...
9. You’ve observed the following returns on Barnett Corporation’s stock over the past five years: -12 percent, 23 percent, 18 percent, 7 percent, and 13 percent What was the arithmetic average return on the stock over this five-year period? What was the variance of the returns over this period? The standard deviation? 10. For problem 9, suppose the average inflation rate over this period was 3.2 percent and the average T-bill rate over the period was 4.3 percent. A What...
A mutual fund has earned annual returns of 11%, -5% and 33% over the past three...
A mutual fund has earned annual returns of 11%, -5% and 33% over the past three years. If the average risk-free rate during that time was 2% per year, what was this fund's Sharpe Ratio during that time period?
A mutual fund has earned annual returns of 11%, -5% and 15% over the past three...
A mutual fund has earned annual returns of 11%, -5% and 15% over the past three years. If the average risk-free rate during that time was 2% per year, what was this fund's Sharpe Ratio during that time period?
A mutual fund has earned annual returns of 11%, -5% and 27% over the past three...
A mutual fund has earned annual returns of 11%, -5% and 27% over the past three years. If the average risk-free rate during that time was 2% per year, what was this fund's Sharpe Ratio during that time period?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT