wanganjie

 

3、Examining a network view of the hedge fund industry over the past decade reveals that:

A) there is little support for the unwinding hypothesis.

B) the multi-strategy category of hedge funds had the most significant decrease in connectedness to other hedge funds over the past decade.

C) correlations between hedge funds have increased over time.

D) the unwinding of the long/short quantitative market-neutral funds in August of 2007 was strictly the result of factors within its own sector. 

wanganjie

 

The correct answer is C

Absolute correlations between hedge funds have increased over the past decade, suggesting the unwinding of the long/short quantitative market-neutral strategies was caused in part by factors outside the sector.

wanganjie

 

4、Empirical research suggests the connectedness of hedge funds has notably increased from 1998 to 2007. This increase in connectedness can be linked to which of the following factors?

I.           The increased correlation of returns between asset classes.

II.         Over the years hedge funds have increased their exposure to traditional market factors.

III.        Hedge fund managers took on less risk during the period 1998 to 2007.

IV.      The ties due to intricate strategies and multi-strategy funds have increased the correlations.

A) I and III.

B) I only.

C) II and IV.

D) None of these.

wanganjie

 

The correct answer is C

Statements II and IV are correct. Funds are investing in more and more common securities. Also, common investment groups increase connectedness among hedge funds.

wanganjie

 

5、Which of the following statement best describes the reason for increased “connectedness?”

A) Funds have increased exposure to traditional market factors.

B) Hedge-fund returns are highly correlated.

C) Network flows have improved over the past 10 years.

D) Improved communications networks have improved connectedness.

wanganjie

 

The correct answer is A

Hedge funds do have increased exposure to traditional market factors.