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Catherine Marco is a portfolio manager with Mouton Investments Inc a regional money management firm She is considering investments in alternative assets and decides to research the following three

Catherine Marco is a portfolio manager with Mouton Investments, Inc., a regional money management firm. She is considering investments in alternative assets and decides to research the following three questions about long-short strategies and hedge funds: (1) How can the alpha generated from a long-short strategy in one asset class be transported to another asset class? (2) What are the three major quantifiable sources of risk that a fund of hedge funds manager must consider in risk monitoring? (3) For a fund of hedge funds, how does risk-based leverage differ from accounting-based leverage? a. Formulate one correct response to each of Marco s three questions. Marco decides to explore various hedge fund investment strategies and reviews the following three strategy components: i. Buy stocks after positive earnings surprise announcements, anticipating that the stock price will rise in the short term. ii. Establish appropriate long and short positions in stocks of companies that have announced a merger or acquisition or are rumored to be considering such a transaction. iii. Use neural networks to detect patterns in historical data. b. Identify the hedge fund investment strategy that is best characterized by each of the three strategy components reviewed by Marco. Following her research, Marco applies her findings to the situation of an individual client. This client currently holds only traditional equity and fixed income investments and is willing to consider inve

 

May 15 2020 View more View Less

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