A fund manager shows you their return data and calculates that they have outperformed the CAPM by 4.5% per year for the past 30 years. They charge steep fees, however. Do you invest with the manager? a)Yes, if the data is correct this means the fund manager has alpha and is worth the management fees. b)No, would also like to know what is the volatility of the returns. C)No, would also like to see the if the returns are exposed to other known risk factors, such as the HML factor, among others.
A fund manager shows you their return data and calculates that they have outperformed the CAPM by 4.5% per year for the past 30 years. They charge steep fees, however. Do you invest with the manager? a)Yes, if the data is correct this means the fund manager has alpha and is worth the management fees. b)No, would also like to know what is the volatility of the returns. C)No, would also like to see the if the returns are exposed to other known risk factors, such as the HML factor, among others.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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