Securing Investment Returns in the Long Run Quiz

Securing Investment Returns in the Long Run Quiz Answer. In this post you will get Quiz & Assignment Answer Of Securing Investment Returns in the Long Run

 

Securing Investment Returns in the Long Run

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Week- 1

Graded quiz on the content of Week 1

1.
Question 1
Your financial advisor calls to tell you that the value of
the global equity portfolio you have asked her to manage for you decreased by
-2% last year. What additional information would be useful for you to better
gauge the performance of your global equity portfolio? (check all that apply)

1 point

  • The performance of the same portfolio over previous years.
  • The performance of global equity portfolios managed by other financial advisors.
  • The performance of an international stock index.
  • The amount of risk that was taken by your financial advisor when managing the portfolio.
  • The performance of an international bond index.

2.
Question 2
Complete this sentence: “We tend not to sell losing or
non-performing positions because…

1 point

  • …almost all winning positions start by losing money.”
  • …we often forget our purchase price.”
  • …we think that as long as we keep them in our portfolios, we haven’t lost any money.”
  • …we monitor our positions too infrequently.”

3.
Question 3
A mutual fund… (check all that apply)

1 point

  • …is an investment vehicle.
  • …is an asset in itself.
  • …pools money coming from many investors.
  • …is a rather costly solution to diversify one’s wealth internationally.

4.
Question 4
The Net Asset Value (NAV) of a mutual fund… (check all that apply)

1 point

  • …allows share of the fund to be traded intra-day (such as stocks and bonds).
  • …is the value of all investments of the fund divided by the number of outstanding shares.
  • …corresponds to the price of a share of the fund.
  • …is calculated several times a day.

5.
Question 5
Closed-end funds are… (check all that apply)

1 point

  • …priced according to several factors including the skills of the fund manager.
  • …constantly open to new investors.
  • …typically priced at a premium or discount relative to their NAV.
  • …more suitable for investing in quite liquid assets.

6.
Question 6
Last year, the quality of Linda’s research allowed her fund
to perform better than 57% of her competitors after fees. What sort of
investment management was Linda conducting?

1 point

  • Passive management
  • Active management
  • None of the above (pas shuffle options)

7.
Question 7
According to several studies, what is most likely to happen
to the performance of Linda’s fund next year (after fees)?

1 point

  • It will still be better than 57% of her competitors’.
  • It will be better than more than 57% of her competitors’.
  • It will be better than less than 57% of her competitors’.

8.
Question 8
If you had to choose between allocating your wealth between
active and passive funds based on the long term US Treasury yield, you would… (check all that apply)

1 point

  • …allocate more to active funds when the yield decreases.
  • …allocate more to passive funds when the yield increases.
  • …allocate more to passive funds when the yield decreases.
  • …allocate more to active funds when the yield increases.

9.
Question 9
Which of the following characteristics apply to passive
management? (check all that apply)

1 point

  • It promotes “herd behavior” by buying assets irrespective of their valuation.
  • It may seriously underperform its
    benchmark.
  • It has lower costs than active management.
  • It avoids the purchase of assets solely based on the fact that they belong to the index of reference.

 

 

Week- 2

Graded quiz on the content of Week 2

1.
Question 1
You are not happy with the performance your wealth manager
delivered last year: he delivered a -6% return while his benchmark was down
-7%. As a result, he suggests you change the mandate you gave him so that he
can better capture the upside potential while avoiding losses. What sort
mandate should you give him?

1 point

An excess return mandate

A relative return mandate

None of the above

2.
Question 2
To which performance ratio does the following formula correspond?

 

1 point

None of the above

The Sortino ratio

The Treynor ratio

The Sharpe ratio

3.
Question 3
Which of the following propositions describes a weakness of
the Sharpe ratio in terms of risk-adjusted performance measurement?

1 point

It fails to correctly capture risk-adjusted performance when returns are not normally distributed.

It is not intuitively appealing.

It fails to correctly rank actively managed funds when compared to the Treynor ratio.

It is quite complicated to use.

4.
Question 4
The rationale behind the Treynor ratio is that you should
only be rewarded for the risk you are taking that…

1 point

…can be hedged by using forwards and options.

…can be diversified away by adding more assets to your portfolio.

…cannot be diversified away by adding more assets to your portfolio.

…cannot be hedged by using forwards and options.

5.
Question 5
Which of the following performance ratios makes use of the
standard deviation of returns that are below the mean?

1 point

The Treynor ratio

The Sortino ratio

The Sharpe ratio

The Return-Risk ratio

6.
Question 6
Typical asset pricing models have different risk factors.
What characteristics must each of these factors have? (check all that apply)

1 point

They must be systematic.

They must be subject to unexpected changes.

They must be priced.

One of them must be the risk-free rate.

7.
Question 7
Which of the following statements regarding the Fama &
French 3-factor asset pricing model are true? (check all that apply)

1 point

One of its factors reflects the premium earned on average by small stocks over large stocks.

One of its factors reflects the premium earned on average by value stocks over growth stocks.

It has a strong theoretical foundation for the premiums earned by its factors.

It is also called the “CAPM”.

It is rarely used by researchers and practitioners nowadays.

8.
Question 8
Why is it important not to omit risk factors when evaluating
the performance of a fund manager?

1 point

The estimated alpha is likely to be inflated, leading us to believe that the manager has less security selection skills than he actually has.

The estimated alpha is likely to be inflated, leading us to believe that the manager has more security selection skills than he actually has.

The estimated alpha is likely to be deflated, leading us to believe that the manager has more security selection skills than he actually has.

The estimated alpha is likely to be deflated, leading us to believe that the manager has less security selection skills than he actually has.

9.
Question 9

What is the total Stock Selection Effect stemming from this fund’s performance?

Please give your answer in basis points. For example, if your answer is 0.0014 (or 0.14%), then type in “14”.

1 point
Enter answer here

 

 

Week- 3

Graded quiz on the content of Week 3

1.
Question 1
100 fund managers are ranked according to the performance of
their fund over the past year. According to this ranking, Fund manager B
belongs to the 50th to 75th percentile group. Assuming
that the lower the percentile the better the performance, which of the
following statements are correct?

1 point

Fund manager B performed better
than at least 75 other fund managers.

Fund manager B performed better
than at least 50 other fund managers.

Fund manager B performed worse
than at least 50 other fund managers.

2.
Question 2
A fund manager has a MAR equal to 2.5. His biggest drawdown
was 52%. What is his compound annual growth rate?

Please give your answer in percentage terms. For example, if your answer is 46%, type in “46”.

1 point
Enter answer here

3.
Question 3
Using a single performance criterion that accounts for
drawdowns, you wish to compare three fund managers with track records that
differ in length. Which of the following ratio will you use?

1 point

The MAR ratio

The Sharpe ratio

The Treynor ratio

The CALMAR ratio

4.
Question 4
A fund has an expected excess return of 3% relative to its
benchmark. Its active risk is equal to 1%. What it its information ratio?

1 point
Enter answer here

5.
Question 5
Which of the following factors can directly influence the
value of the information ratio of a fund manager? (check all that apply)

1 point

The return of the risk-free
asset.

The performance of her
competitors.

The choice of the benchmark.

The time
period chosen to measure the ratio.

6.
Question 6
Which of the following characteristics are part of the
“cons” structured products? (check all that apply)

1 point

They entail possible negative tax
implications.

They are complicated to manage as
a client.

They are exposed to counterparty
risk.

Their payoff profile is unknown
in advance.

They have fees attached to them.

They are exposed to liquidity
risk.

7.
Question 7
Linear asset pricing models such as the CAPM or the Fama
& French 3-factor model are inadequate to measure the performance of hedge
funds. Why?

1 point

They don’t invest in stocks

They don’t disclose their
performance to their clients.

They use investment strategies
that can result in non-linear payoff structures.

They are often situated outside
of the USA.

8.
Question 8
What traditionally happens when a hedge fund has a large alpha? (check all that apply)

1 point

Its alpha is likely to increase
further over the following years.

New investors flock in the fund,
increasing the size of its assets under management which makes it difficult for
the manager to continue to generate positive risk-adjusted performance.

Its alpha is likely to decrease
over the following years.

New investors flock in the fund,
increasing the size of its assets under management which makes it easier for
the manager to stop generating negative risk-adjusted performance.

New investors flock in the fund, increasing
the size of its assets under management which makes it easier for the manager
to continue to generate positive risk-adjusted performance.

9.
Question 9
Which of the following statements regarding the performance
of US mutual funds are true? (check all that apply)

1 point

A minority of them do not display
a positive alpha.

Among those who display a
positive alpha, a majority relied on skills to do so.

Among those who display a
positive alpha, a majority relied on luck to do so.

A majority of them do not display
a positive alpha.

10.
Question 10
Why is the estimated proportion of skilled equity fund
managers higher in Europe than in the US?

1 point

European equity fund managers tend
to take more risk.

European equity fund managers
have access to more efficient trading technology.

European equity funds have a
closed-end structure.

European equity fund managers
tend to depart from their pure equity mandate and add other assets to their
portfolio.

 

 

Week- 4

Graded quiz on the content of Week 4

1.
Question 1
Sustainable investing… (check all that apply)

1 point

…integrates social issues in its
approach, such as the composition of the board of directors of companies.

…integrates environmental issues
in its approach.

…is similar to impact investing.

…integrates governance issues in
its approach, such as whistleblower schemes implemented by companies.

2.
Question 2
When talking about sustainable investing and ESG issues,
what does the letter “G” correspond to?

1 point

The relationship between the firm
and its shareholders.

The relationship between the firm
and non-shareholding stakeholders (e.g. employees, communities).

The relationship between the firm
and the government.

The relationship between the firm
and the judiciary system.

3.
Question 3
Which of the following are theoretical arguments in favor of
the outperformance of sustainability-oriented investment funds? (check all that apply)

1 point

Companies that neglect ESG issues expose themselves to catastrophic events.

These funds are traditionally
smaller, allowing them to charge lower fees to investors.

Companies concerned with ESG issues are more likely to acquire and retain customers as well as human capital.

Information captured in ESG issues and opportunities might not be correct valued by other market participants.

4.
Question 4
When evaluating the added-value of sustainable investing… (check all that apply)

1 point

…it is better to study the performance and risk at the fund level to get rid of firm-level effects.

…one has to keep in mind that it is a form of passive fund management.

…most of the research finds no statistically significant difference in risk-adjusted performance between traditional and sustainable fund management.

…it is better to study the performance and risk at the company level to get rid of fund manager effects.

5.
Question 5
A recent study examining hundreds of academic papers,
industry reports, newspaper articles and books finds that… (check all that
apply)

1 point

A majority of those show that firms with good sustainability standards have a lower cost of capital.

A majority of those show a negative correlation between good sustainability practices and firms’ stock price performance.

Good ESG practices cause better financial performance.

A majority of those show a positive correlation between ESG practices and firms’ operational performance.

6.
Question 6
Which of the following statements regarding investing and
carbon footprint are true? (check all that apply)

1 point

One can gain exposure to a broad market index while at the same time reducing one’s carbon footprint.

Financial policy makers and investors are increasingly worried about climate change and greenhouse gas emissions.

Indirect greenhouse gas emissions stem from sources that are owned or controlled by the reporting entity.

“Global Warming Potential” (GWP) describes the amount of greenhouse gas that has the same CO2 equivalent.

7.
Question 7
Which of the following propositions correspond to insights
provided by Neurofinance? (check all that apply)

1 point

Experienced investors perform better than novices.

When trying to explain investor behavior, cognitive biases are often only second to the actual financial data investors are using and analyzing.

Investors fail to assess the risk and expected returns to then take rational investment decisions.

As a result of overconfidence, investors build portfolios that have more risk and more expected return than is supported by the actual data at their disposal.

Investors are well aware of their risk tolerance.

8.
Question 8
You have just built a portfolio with the objective of
maximizing your wealth over the next year. You are now looking forward for the
first monthly gains. What is happening in your brain? (check all that apply)

1 point

The region of your brain activating right now is the same that activates when anticipating food or drink.

The “financial center” of your
brain has just stopped activating.

The region of your brain activating right now is the same that activates when experiencing events related to social rewards.

The region of your brain
activating right now is the same that activates when experiencing empathy.

9.
Question 9
What are the characteristics of “Big Data”? (check all that apply)

1 point

It is a single large dataset that can be quickly interrogated.

It is useful to reveal untapped trends, patterns and correlations.

It is a collection of datasets that are large and complex.

It is a collection of datasets that are relatively time-consuming to interrogate.

10.
Question 10
Which of the following characteristics are part of the
“pros” of Robo-avisors? (check all that apply)

1 point

They allow for an automatic portfolio rebalancing.

They entail lower cost relative to their human counterparts.

The increased regulation and lowered interest rates is a thriving environment for them.

Automated transactions ensures optimality.

They are able to optimize taxes on capital gains.

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