[2008] Topic 77: Can Hedge-Fund Returns be Replicated? The Linear Case 相关习

wanganjie

 

AIM 1: Explain and distinguish between the strategies followed by “Capital Decimation Partners” and “Capital Multiplication Partners.”

1、The Capital Decimation Partners hypothetical strategy is most similar to which of the following?

A) Buying insurance.

B) Selling insurance.

C) A perfect market-timing strategy.

D) A protective put option strategy.

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wanganjie

 

3、Linear clones created using the fixed-weighted method would be most appropriate for which of the following investors?

I.           Active investor implementing a dynamic asset-allocation policy.

II.         Passive investor with little expertise in trading.

A) I only.

B) Both I and II.

C) II only.

D) Neither I nor II.

wanganjie

 

The correct answer is C

More active investors engaging in dynamic asset-allocation will prefer the rolling-window method, and the more passive investors will prefer the fixed-weight approach.

wanganjie

 

4、Which of the following most accurately describes the liquidity of linear clones of hedge funds and the hedge funds that they are replicating?

I.           Positive first-order autocorrelation is an indicator of illiquidity risk.

II.         Hedge fund linear clones are less liquid than the hedge funds that they replicate.

III.        Larger p-values for the Ljung-Box Q-statistic indicate more statistically significant autocorrelation.

IV.      Larger p-values for the Ljung-Box Q-statistic indicate less statistically significant autocorrelation.

A) I and IV.

B) I, II and III.

C) II and III.

D) I and III.

wanganjie

 

The correct answer is A

Positive first-order autocorrelation indicates an illiquidity, and the larger p-values indicate less significant measures of autocorrelation (illiquidity).

wanganjie

 

2、Which of the following best describes the impact of leverage on the linear clones that replicate hedge fund styles?

I.           Linear clones are not practical because the leverage values were too high to be practical.

II.         Linear clones can replicate the returns of hedge funds they represent by using futures contracts.

III.        The high amounts of leverage required to replicate the hedge fund returns makes the linear clones not practical.

A) I only.

B) III only.

C) II only.

D) I and III.