程序代写案例-BFC3241 2021
时间:2022-06-21
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BFC3241 2021 Semester 2 Final Exam

Question 1
Pick the best option:
In the context of market efficiency, the stock market is…
A. allocationally efficient when information is costless, and informed investors receive information
simultaneously.
B. informationally efficient when the stock market is liquid and there is no transaction cost.
C. operationally efficient when stock market investors’ savings are directed to the most productive
corporate investments.
D. None of these statements about market efficiency is true.
E. All of these statements about market efficiency are true.

Question 2
Pick the best option:
The ability of a long-short strategy in the stock market to consistently deliver significant alpha may
indicate that…
A. the market is allocationally efficient.
B. the market is informationally efficient.
C. there is no practical difficulty in eliminating arbitrage opportunities.
D. the portfolio manager is lucky.
E. None of the statements in this question is plausible.

Question 3
Pick the best option:
Grossman Stiglitz paradox states that…
A. in a market where information collection and analysis are costly, there is no point for the security
analysis industry to exist.
B. in a market where information collection and analysis are costless, security analysts offer a
valuable service.
C. the disbelief in market efficiency makes the market inefficient.
D. the belief in market efficiency makes the market efficient.
E. None of these statements about Grossman-Stiglitz paradox is true.

Question 4
Pick the best option:
The publication of academic research relating to a specific return pattern…
A. destroys stock return predictability if predictability reflects investors’ compensation for bearing
systematic risks.
B. induces a change in the behavior of rational market participants if the return pattern enables
investors to predict abnormal returns.
C. is irrelevant since market participants do not care about what academics have to say.
D. All of these statements about the publication of academic research are correct.
E. None of these statements about the publication of academic research is correct.

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Question 5
Pick the best option:
Momentum challenges the concept of market efficiency…
A. in the strong form since the momentum trading strategy does not appear to be risky.
B. partly because it is difficult to come up with a risk-based explanation for past winners to become
winners in the medium term but losers in the long term.
C. because Fama, who is often considered as the “father” of market efficiency, includes momentum in
his latest multi-factor model.
D. All of these statements about momentum are correct.
E. None of these statements about momentum is correct.

Question 6
Pick the best option:
Using fundamental analysis to identify a mispriced stock…
A. is not hard since analysts have several valuation models to choose from.
B. requires judgement in choosing model assumptions; hence, analysts will always agree on an
intrinsic value of a stock.
C. is more likely to work when market pays less attention to the stock.
D. All of these statements about fundamental analysis are correct.
E. None of these statements about fundamental analysis is correct.

Question 7
Pick the best option:
A. The examination of the accounting policies of competitors in the same industry is part of the
analysis of the threat of rivalry in Porter’s five forces.
B. Prospective analysis allows analysts to make sound assumptions in retrospective analysis.
C. Understanding a firm’s current product market mix is essential to strategy analysis.
D. All of these statements about equity valuation are correct.
E. None of these statements about equity valuation is correct.

Question 8
Pick the best option:
The average Price to Earnings (P/E) multiple of firms in the electronics industry is 120 times. Sony
Corporation (NYSE ticker: SNE) is expected to deliver an annual dividend per share of $0.75. Its
payout ratio is expected to remain at 40%. Based on the given information, the intrinsic value of its
stock should be (rounded to two decimal places):
A. $48.00.
B. $90.00.
C. $225.00.
D. $300.00.
E. None of the options.

Question 9
The average P/B multiple in the life insurance industry is 4.00 times. Prudential Financial Inc. (NYSE
ticker: PRU) has a book value of equity of $1,380 million and 320 million shares outstanding. You
believe that PRU should be valued at 25% higher than the industry average P/B ratio. Based on your
belief, your estimate of the intrinsic value of its stock should be:
A. $4.31
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B. $5.00
C. $17.25
D. $21.56
E. $4.00

Question 10
Pick the best option:
The relative valuation approach:
A. is based on the no-arbitrage principle, i.e., similar assets should be traded at similar prices.
B. assumes that the market is incorrect on average and mispricing can be identified.
C. can answer the question of whether or not an industry is overvalued.
D. None of the statements about relative valuation is correct.
E. All of the statements about relative valuation are correct.

Question 11
Pick the best option:
A. The Dividend Discount Model (DDM) and the Free Cash Flow to Equity (FCFE) model both
generate the intrinsic value of equity; hence, analysts only need to use one or the other.
B. The Free Cash Flow to Equity (FCFE) model cannot easily used to value the stock of firms which
do not pay out dividends.
C. The Dividend Discount Model (DDM) explicitly accommodates changes in future financing
policies.
D. None of the statements about DDM and FCFE is correct.
E. All of the statements about DDM and FCFE are correct.

Question 12
Pick the best option:
The stock of Fabulous Four Ltd. is currently traded at $20 per share. Its book value of equity is $5 per
share. The consensus by analysts indicates that the firm’s book value will grow at the rate of 5% p.a.
infinitely. Its return on equity is 25% p.a. Based on the information given, the market consensus for
the cost of equity capital is…
A. 10% p.a.
B. 25% p.a.
C. 9% p.a.
D. 15% p.a.
E. None of the options provided.

Question 13
Pick the best option:
Over the years, researchers and practitioners have questioned several assumptions for the Capital
Asset Pricing Model (CAPM) to hold. For example,…
A. The CAPM assumes no short selling although in reality, some assets can be short sold.
B. The CAPM assumes that not all risky assets are tradable although in reality, they all are.
C. The CAPM assumes that investors’ borrowing rate is lower rate than lending rate although in
reality, the lending rate is often lower than the borrowing rate.
D. None of the statements about the CAPM assumptions is correct.
E. All of the statements about the CAPM assumptions are correct.

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Question 14
Pick the best option:
The stock of XYZ Ltd. has a market beta of 1.0, a Small-Minus-Big (SMB) loading of 0.5, a High-
Minus-Low (HML) loading of 0.5, and a Up-Minus-Down (UMD) loading of 0.5. The market return
is 8% per annum, and the risk-free rate is 2% per annum. The SMB, HML, and UMD premia are all
4% per annum.
What is the required rate of return on this stock using the Fama and French three-factor model?
A. 8.00% p.a.
B. 10.00% p.a.
D. 12.00% p.a.
C. 14.00% p.a.
E. None of the options provided.

Question 15
Pick the best option:
The Fama and French 6-factor model…
A. augments the Fama and French’ three-factor model with three new risk-based factors.
B. associates firms’ past book-to-market ratio, past physical investment, and future profitability with
their expected stock returns.
C. associates firms’ past book-to-market ratio, past profitability, and future physical investment with
their expected stock returns.
D. All of the statements about the Fama and French 6-factor model are correct.
E. None of the statements about the Fama and French 6-factor model is correct.

Question 16
Pick the best option:
Which of the following statements regarding the capital allocation line (CAL) is false?
A. The CAL is the efficient frontier of risky assets.
B. The CAL represents risk-return combinations.
C. The slope of the CAL represents the reward-to-volatility ratio.
D. In equilibrium, assets can lie off the CAL but always lie on the Securities Market Line.
E. All of the options provided.

Question 17
Pick the best option:
A. We use standard deviation as a measure of risk because we assume that returns have a normal
distribution.
B. We use standard deviation as a measure of risk because we assume that returns have a distribution
with fat tails.
C. We use standard deviation as a measure of risk because we assume that returns have a distribution
with skewness.
D. We use standard deviation as a measure of risk because we assume that the distribution of return is
symmetrical.
E. None of the options provided.

Question 18
Pick the best option:
A. Investors are subject to the bid-ask spread component of transaction costs only when the stock
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price level significantly changes between the time the investment position is opened and closed.
B. The bid price is always higher than the ask price and this difference reflects the bid-ask spread
component of transaction costs.
C. Generally speaking, institutional investors are more likely to be concerned about the price impact
of their orders than individual investors.
D. Commission fees are called implicit transaction costs because investors can easily observe these
fees prior to placing their orders.
E. None of the options provided.

Question 19
Pick the best option:
In an asset pricing model, betas reflect…
A. a stock’s expected return.
B. a stock’s exposure to the systematic risks explicitly considered in the model.
C. a stock’s exposure to any source of systematic risks.
D. All of the statements about betas are true.
E. None of the statements about betas is true.

Question 20
Pick the best option:
It is now the end of the fiscal year 2020 and you are valuing the stocks of Value Maximizer Ltd. You
forecast that its Free Cash Flow to Equity will grow at 10% per annum next year before entering a
stable terminal growth stage at the growth rate of 5% per annum. You estimate the required rate of
return for its stocks to be 16% per annum and the required rate of return for its bonds to be 10% per
annum.
The company’s most recent Free Cash Flow to Equity per share is $2.00. It pursues a balanced capital
structure with 50% debts and 50% equity. Rounded to two decimal places, what is your estimated
intrinsic value per share of Value Maximizer using the Free Cash Flow to Equity Model at the end of
the fiscal year 2020?
A. $25.55.
B. $13.75.
C. $20.00.
D. $27.50.
E. None of the options provided.

Question 21
Pick the best option:
All investment decision-making errors can be split into two categories, which include…
A. Information processing mistakes and behavioral biases.
B. Behavioral biases that can and cannot be corrected.
C. Behavioral biases and limits to arbitrage.
D. Forecasting errors and framing biases.

Question 22
Pick the best option:
Which of the following(s) is (are) an example(s) of limits to arbitrage?
A. Market risk.
B. Standard deviation of stock returns.
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C. Transaction costs.
D. Market risk and transaction costs.

Question 23
Pick the best option:
Returns on small stocks are generally larger than returns on big stocks. This return pattern can be
attributable to investors, being afraid of making unconventional investment decisions, neglecting
small stocks and choosing to invest in the stocks of well-known big companies instead. Such an
investor behavior best corresponds to the following behavioral bias:
A. Mental accounting
B. Loss aversion
C. Disposition effect
D. Regret avoidance

Question 24
Pick the best option:
Which of the following is an example of an extrapolative belief?
A. The stock price of Intel has been decreasing in the last 3 months. Therefore, I think that it is
likely to continue decreasing in the nearest future.
B. Google is a tech stock. Since the Initial Public Offerings, its stock price has increased by
hundreds of percentage points. Zoom is also a tech stock. Based on what happened to Google,
I expect the stock of Zoom to increase by hundreds of percentage points in the future.
C. I invested in Amazon stock yesterday. Today, Amazon released the news that it will acquire the
largest physical book store chain in Europe. I interpret this news as good news, confirming my
belief that I made a good investment yesterday.
D. I invested in Amazon stock yesterday. Today, upon Amazon’s release of less-than-expected
earnings figures, its stock price dropped. I believe that the stock price will increase in the future
and I made a good investment yesterday.

Question 25
Pick the best option:
Which of the following option could explain the existence and persistence of market inefficiencies?
A. Behavioral biases
B. Limits to arbitrage
C. Behavioral biases together with limits to arbitrage
D. Herding

Question 26
Pick the best option:
Mr. X has to choose between (i) a sure loss of -$200 and (ii) the game of tossing a coin with a 50%
chance of paying $400 dollars (if tails) and a 50% chance of paying nothing. Which choice would
Mr. X make?
A. Expected Utility Theory: a sure loss of -$200; Prospect Theory: a sure loss of -$200.
B. Expected Utility Theory: a sure loss of -$200; Prospect Theory: the game of tossing a coin.
C. Expected Utility Theory: the game of tossing a coin; Prospect Theory: a sure loss of -$200.
D. Expected Utility Theory: the game of tossing a coin; Prospect Theory: the game of tossing a
coin.

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Question 27
Pick the best option:
You are an authorized market participant of the IVV ETF (S&P 500 ETF). The current best bid
and ask prices of IVV are $429.69 and $430.02, respectively. You can buy one basket of securities
underlying one IVV for $430.38 and sell this basket for $430.10. Based on this information, you
have decided to conduct an arbitrage using market orders. What is the maximum profit you can
make for a trading block of 100,000 IVV ETF shares, assuming that you can buy and sell this
amount at the best bid and ask prices?
A. $800
B. $36,000
C. $131,000
D. $8,000
E. None of the options provided

Question 28
Pick the best option:
Which of the following statements about open-end passive mutual funds and ETFs tracking the
same index is incorrect?
A. Both of these funds can be bought on exchanges.
B. Both of these funds try to replicate the performance of the same index.
C. Both of these funds rebalance their portfolios as the constituents of the index change their
weights in the index.
D. Both of these funds may not hold all the constituents of the index they track.

Question 29
Pick the best option:
Which of the following investment vehicles represent(s) passive investment portfolios?
A. The mutual fund that tracks the performance of the spliced index (80% of the ASX300 index
and 20% of the ASX Government Bond Index).
B. The exchange-traded fund that tracks the performance of the S&P 500 index.
C. Both (i) the mutual fund that tracks the performance of the spliced index (80% of the ASX300
index and 20% of the ASX Government Bond Index) and (ii) the exchange-traded fund that
tracks the performance of the S&P 500 index.
D. AustralianSuper High Growth superannuation fund.

Question 30
Pick the best option:
Which of the following statements about investment funds is correct?
a) Most passive mutual funds are open-end.
b) Most open-end mutual funds are passive.
c) Most exchange-traded funds are based on debt securities.
d) In general, equities comprise the largest proportion of the superannuation funds’ portfolios.

Question 31
Pick the best option:
Which of the following investment strategies best suits a person who believes that markets are
efficient in the semi-strong form?
A. Buy and hold a market index ETF
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B. ETF arbitrage
C. Trading on industry news using industry ETFs
D. Portable alpha

Question 32
Pick the best option:
Authorized market participants can:
A. create and redeem ETF shares in the secondary market.
B. create and redeem ETF shares in the primary market.
C. create ETF shares in the primary market and redeem them in the secondary market.
D. All of the options provided.

Question 33
Pick the best option:
Which of the following investment styles is often considered as having the highest risk?
A. Small-Cap Growth
B. Mid-Cap Blend
C. Mid-Cap Value
D. Large-Cap Blend

Question 34
Pick the best option:
A hedge fund charges a management fee of 2% and an incentive fee of 20% on the performance
over the money market interest rate. Compute your total after-fee return from investing $100,000
in a fund that has made a 20% return on top of the money market interest rate.
A. 20%
B. 14.00%
C. 18%
D. There is insufficient information to determine the after-fee return.

Question 35
Pick the best option:
You invest $100 million on a hedge fund that charges a management fee of 2% and an incentive
fee of 20% on the performance over the benchmark return. Calculate the total fees (in dollars) if
the hedge fund made 30% (total return) on its investments while the benchmark return over the
same period was 16%.
A. $4.8 million
B. $6 million
C. $8 million
D. $16 million
E. None of the options provided.

Question 36
Pick the best option:
Which of the following hedge fund strategies is non-directional?
A. Global macro
B. Dedicated short bias
C. Convertible arbitrage
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D. Long-short equity hedge
E. None of the options provided.

Question 37
Pick the best option:
Which of the following statements is correct?
A. Investment styles categorize investment managers to more and less risk-averse groups.
B. Funds with high Active Share trade more frequently but rarely outperform their benchmarks.
C. Active funds try to minimize their tracking error.
D. The outperformance of the benchmark by an active fund is not informative because active funds
select benchmarks that they are sure they can outperform.

Question 38
Pick the best option:
Hedge fund X is currently managing a portfolio worth of $500 mil. The fund has a typical “two
and twenty” fee structure. According to the Black-Scholes formula, the value of the incentive
scheme is $53.93, i.e., c = $53.93. What is the expected total fee (in %) of this fund?
A. None of the options provided.
B. 10.79%
C. 12.79%
D. 2.16%
E. 4.16%

Question 39
Pick the best option:
Portfolio A has an annual return of 20% with the standard deviation of 40%. Its market beta is 1.6.
The annual return on the Government T-note is 1.5% and on the market index is 12%. What is the
Sharpe ratio of Portfolio A?
A. 0.46
B. 0.50
C. 0.12
D. 0.02
E. None of the options provided.

Question 40
Pick the best option:
Last year, Portfolio X’s total return was 15% p.a. while the market portfolio’s return was 12% pa.
The standard deviation of the return of portfolio X and the market portfolio were 22% and 20%,
respectively. The market beta of portfolio X was 1.00. The annual risk-free rate was 2%. What was
the M2 of Portfolio X?
A. 3.00%
B. 1.64%
C. 1.82%
D. 3.64%
E. None of the options provided.

Question 41
Pick the best option:
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Which of the following statements is incorrect?
A. Investors should take into account the level of portfolio risk when choosing between two
alternative investment portfolios.
B. Investors use the Sharpe and Treynor ratios interchangeably in making investment decisions,
i.e., it does not matter which ratio is used.
C. To compare two investment portfolios, it is insufficient to only consider their average historical
returns.
D. In practice, historical portfolio returns are used to approximate their expected returns

Question 42
Pick the best option:
Which of the following statements about the Market Portfolio is correct?
A. The Sharpe ratio of the Market Portfolio is equal to its Treynor ratio.
B. The Sharpe ratio of the Market Portfolio is equal to to its CAPM alpha.
C. The Treynor ratio of the Market Portfolio is equal to its CAPM alpha.
D. The CAPM alpha of the Market Portfolio is equal to its alpha from the Fama-French three-
factor model.
E. None of the options provided.

Question 43
Pick the best option:
Portfolio A’s return is 15% p.a., the risk-free rate is 1.0% p.a., the market return is 10% p.a., the
SMB portfolio return is 8% p.a., and the HML portfolio return is 11% p.a. The betas of portfolio
A with respect to the market, SMB, and HML portfolios are 1.00, 0.70, and -0.30, respectively.
Calculate the alpha of Portfolio A using the Fama-French 3-factor model.
A. None of the options provided.
B. 5.00%
C. 3.10%
D. 6.90%
E. 2.70%

Question 44
Pick the best option:
Which of the following fund performance measures takes into account the fact that investment
funds change the level of risk of their portfolios from time to time?
A. Alpha
B. Sharpe ratio
C. Treynor ratio
D. None of the options provided.

Question 45
Pick the best option:
Future of Financial Advice Legislation requires all financial advisors in Australia to:
A. disclose fees they charge their clients on a quarterly basis
B. renew their agreements on fees with the clients at least every two years.
C. not take any volume-based commission payments from their institutional clients.
D. act in the best interests of their employers.

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Question 46
Pick the best option:
John Dow, a research analyst with a brokerage firm, changes his recommendation for company X
from a “buy” to a “sell.” On the day of the change, he emails this information to all the brokerage’s
clients and simultaneously receives a call from a client with a buy order for 500 shares of company
X. To comply with the CFA Code of Ethics, John Dow should:
A. accept the order.
B. advise the customer of the change in recommendation before accepting the order.
C. try to encourage the client to short sell company X instead of buying it.
D. not accept the order because it is contrary to the firm’s recommendation.
E. None of the options provided.

Question 47
Pick the best option:
John Dow was recently appointed as a member of the board of directors of a local charity
organization. The charity is beginning a new fund-raising campaign. John Dow believes many of
his clients at his private financial advising firm can make annual donations to the charity. In his
regular newsletter to all clients in the following week, he includes a small section discussing the
fund-raising campaign. How are John Dow’s actions aligned with the CFA Code of Ethics?
A. John Dow did not violate the CFA Code of Ethics.
B. John Dow violated the CFA Code of Ethics by soliciting donations from his clients through the
newsletter.
C. John Dow violated the CFA Code of Ethics by not getting approval from the charity
organization before soliciting his clients.
D. John Dow violated the CFA Code of Ethics by not getting approval from the board of directors
of his private company before soliciting his clients.
E. None of the options provided.

Question 48
Pick the best option:
During a round of golf, Mr. X, the Chief Financial Officer of a local retail store, ABC Inc.,
mentions to Mr. Y, a local investment adviser and a long-time personal friend, that ABC Inc. is
having an exceptional sales quarter. Mr. X expects the sales to be around 15% higher than the
analysts’ forecasts. The next day, Mr. Y purchases a large stake in an ETF tracking the performance
of all retail stores in the region for his personal account. How are Mr. Y’s and Mr. X’s actions
aligned with the CFA Code of Ethics?
A. Mr. Y violated the CFA Code of Ethics by investing in the ETF that included ABC Inc.
B. Mr. Y violated the CFA Code of Ethics by not getting approval from Mr. X that he could use
this information to trade for his own account.
C. Mr. Y did not violate the CFA Code of Ethics because he did not invest directly in securities of
ABC Inc.
D. Mr. X did not violate the CFA Code of Ethics because the comments made to Mr. Y were not
intended to solicit an investment in ABC Inc.
E. None of the options provided.

Question 49
Pick the best option:
Which of the following statements is correct under the CFA Code of Ethics?
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A. CFA Institute members are prohibited from undertaking independent practice in competition
with their employer.
B. Written consent from the employer is necessary for a CFA Institute member to permit
independent practice that could result in compensation or other benefits in competition with a
member’s employer.
C. CFA Institute Members are prohibited from making arrangements or preparations to go into a
competitive business before terminating their relationship with their employer.
D. CFA Institute Members can undertake independent practice without written consent from their
employer, but they have to notify their employer about an independent practice once it is set
up.
E. None of the options provided.

Question 50
Pick the best option:
Which of the following statement about fiduciary duty in fund management is incorrect?
A. None of the options provided.
B. Fiduciary duty implies that a fund manager must act in the best interest of the fund’s existing
clients.
C. Fiduciary duty implies that a fund manager must act in the best interest of the fund’s future
clients.
D. Fiduciary duty implies that a fund manager must periodically review the performance of the
fund.
E. Fiduciary duty implies that a fund manager can never rely on the advice of outside investment
advisors when making investment decisions on behalf of their clients.


Short answer-question
ABC Hedge Fund manages a portfolio that consists of U.S. equities, U.S government bonds, and
some amount of cash. Below, you can see the performance of each part of the hedge fund portfolio
over the last year along with the returns for the benchmarks that ABC Hedge Fund chose to tie
their portfolio to.

Hedge fund
portfolio return
Weight in the
hedge fund
portfolio
Benchmark return
Benchmark
weight
U.S. Equity 25.0% 0.70 15.5% 0.65
Government
Bonds
0.25% 0.20 -1.62% 0.30
Cash 0.01% 0.10 0.5% 0.05
A. What is the total fund’s over-/under-performance relative to the benchmark? (2 points)
B. Based on the result from part a), what is the contribution of asset allocation and total securities
selection to the relative performance of ABC Hedge Fund? (10 points)
C. In general, what does it mean when a fund manager is ‘timing the market’? (4 points)
D. Discuss how market timing has contributed to the ABC hedge fund’s performance relative to
the benchmark in the context of this question. (4 points)


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SOLUTIONS

MCQs
1d, 2d, 3e, 4b, 5b, 6c, 7c, 8c, 9d, 10a, 11d, 12a, 13d, 14d, 15e, 16a, 17a, 18c, 19b, 20c, 21a, 22c,
23d, 24a, 25c, 26b, 27d, 28a, 29c, 30a, 31a, 32b, 33a, 34d, 35a, 36c, 37c, 38e, 39a, 40c, 41b, 42d,
43e, 44d, 45b, 46b, 47a, 48a, 49b, 50e.

Short-answer question
a) Manager’s portfolio performance = 25%*0.70 + 0.25%*0.20 + 0.01%*0.10 = 17.55%.
Bogey portfolio performance = 15.5%*0.65 + -1.62%*0.30 + 0.5%*0.05 = 9.61%.
Portfolio overperformance = 17.55% - 9.61% = 7.94%

b) Asset allocation contribution

Actual weight
Benchmark
weight
Excess weight
Benchmark
return
Contribution
U.S. Equity 0.70 0.65 0.05 15.5% 0.77%
Government Bonds 0.20 0.30 -0.10 -1.62% 0.16%
Cash 0.10 0.05 0.05 0.5% 0.03%
Total 0.96%

Securities selection contribution

Actual return
Benchmark
return
Excess return Actual weight Contribution
U.S. Equity 25.0% 15.5% 9.50% 0.70 6.65%
Government Bonds 0.25% -1.62% 1.87% 0.20 0.37%
Cash 0.01% 0.5% -0.49% 0.10 -0.05%
Total 6.98%

c) Any of the following answers or similar are correct
• “Managers who time the market change their portfolio allocations depending on
whether the market goes up or down” or
• “Managers who time the market shift between more and less risky securities during
market booms and recessions” or
• “Managers who time the market shift between asset classes during market booms
and recessions” or
• “Managers who time the market buy high-beta assets during market booms, and
low-beta assets during recessions.”

d) Market timing should be reflected in the manager’s ability to allocate their money to asset
classes that are going to perform better than other asset classes.
Asset allocation contribution to the overall fund overperformance is relatively small
(0.96% out of 7.94%) but positive. Thus, market timing has not contributed that much to
the overall overperformance of the fund.
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