Questions from General Investment

Q: A global equity manager is assigned to select stocks from a universe

A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market...

Q: Conventional wisdom says that one should measure a manager’s investment performance over

Conventional wisdom says that one should measure a manager’s investment performance over an entire market cycle. What arguments support this convention? What arguments contradict it?

Q: During a particular year, the T-bill rate was 6

During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager with beta of .5 realized a return of 10%. a. Evaluate the manager based on the portfolio alpha. b....

Q: Bill Smith is evaluating the performance of four large-cap equity

Bill Smith is evaluating the performance of four large-cap equity portfolios: Funds A, B, C, and D. As part of his analysis, Smith computed the Sharpe ratio and the Treynor measure for all four funds....

Q: Primo Management Co. is looking at how best to evaluate the

Primo Management Co. is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios and is interested in trying this approach. As s...

Q: Is it possible for a positive alpha to be associated with inferior

Is it possible for a positive alpha to be associated with inferior performance? Explain.

Q: Recalculate the intrinsic value of Rio Tinto shares using the free cash

Recalculate the intrinsic value of Rio Tinto shares using the free cash flow model of Spreadsheet 18.2 (available in Connect; link to Chapter 18 material) under each of the following assumptions. Trea...

Q: Primo Management Co. is looking at how best to evaluate the

Primo Management Co. is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios and is interested in trying this approach. As s...

Q: Kelli Blakely is a portfolio manager for the Miranda Fund, a

Kelli Blakely is a portfolio manager for the Miranda Fund, a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda po...

Q: We know that the geometric average (time-weighted return)

We know that the geometric average (time-weighted return) on a risky investment is always lower than the corresponding arithmetic average. Can the IRR (the dollar-weighted return) similarly be ranked...