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The correct answer is B

Convertible arbitrage usually takes positions in convertible bonds or preferred stock as well as warrants, etc..., and then takes other positions in the underlying stock.

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The correct answer is A

Equity market timing strategies use stock-screening models based on simple technical trading models.

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13、Managers following a short-selling hedge fund strategy commonly search global equity markets in an attempt to find firms that:

A) use aggressive accounting methods.

B) are the target of an acquisition proposal.

C) are emerging from Chapter 11 bankruptcy.

D) can profit from operational efficiencies.

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The correct answer is A

Seeking firms that use aggressive accounting techniques is a frequent short-seller theme. The short seller would also look at something additional, such as weak fundamentals.

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14、Which of the following activities has the greatest influence when determining a short-selling manager’s success?

A) Psychological barriers of others.

B) Technical analysis.

C) Regulatory oversight.

D) Security selection.

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The correct answer is D

Selection of the correct security itself is the most important contributing factor to the short seller’s return. While others have a psychological aversion to short selling, and many banks and other portfolio managers are restricted from short selling, the short seller helps contribute to efficient capital allocation within an economy.

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The correct answer is D

Pair trading relies more on technical, quantitative analysis than “fundamental” analysis. Some criticize this technical approach as being a “black box” in the sense that investors are not given details regarding the statistical model used to create the strategy.

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11、Which of the following strategies involves purchasing equities of small-cap firms and simultaneously selling equities of large-cap firms?

A) SUE.

B) HML.

C) UMD.

D) SMB.

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The correct answer is D

SMB (“small minus big”) strategy involves purchasing small firms’ stock and also selling large-cap stocks. HML is “high minus low”—buying value stocks and shorting growth stocks. UMD (“up minus down”) is investing in recent winners and shorting recent losers.

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12、Which of the following statements regarding equity market timing strategies as applied by hedge funds is FALSE?

A) The strategy is usually based on fundamental analysis.

B) The strategy often focuses on one particular sector, industry, or geographic region.

C) The strategy involves switching between holdings of money market securities and a long equity portfolio.

D) A key part of the strategy is keeping transactions costs low.