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8) Suppose you were evaluating the performance of three different funds. Your analysis produces the following...

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Finance

8) Suppose you were evaluating the performance of threedifferent funds. Your analysis produces the following results:

Fund

Alpha

Beta

Hedge fund following a market neutral strategy

0.1

1.6

Mutual fund investing actively in stocks and bonds

-0.1

0.4

Index Fund tracking the S&P 500 Index

0.1

1.6

Describe the performance of each fund (i.e. good, bad, averageetc.) and explain your answer in each case.

Answer & Explanation Solved by verified expert
4.1 Ratings (619 Votes)
Alpha Meaning of AlphaAlpha measures performance of stock If Alpha is positive it means that stock has performed better than market If Alpha is negative it shows than stock has under performed than the market If it is Zero it means it has performed as the market Formula of Alpha Return of Stock or portfolio CAPM Return Where CAPM Return is Risk Free    See Answer
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Transcribed Image Text

8) Suppose you were evaluating the performance of threedifferent funds. Your analysis produces the following results:FundAlphaBetaHedge fund following a market neutral strategy0.11.6Mutual fund investing actively in stocks and bonds-0.10.4Index Fund tracking the S&P 500 Index0.11.6Describe the performance of each fund (i.e. good, bad, averageetc.) and explain your answer in each case.

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