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Chap024 - Chapter 24 Portfolio Performance Evaluation...

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Chapter 24 Portfolio Performance Evaluation Multiple Choice Questions 1. Trading activity by mutual funds just prior to quarterly reporting dates is known as A) insider trading. B) program trading. C) passive security selection. D) window dressing. E) none of the above. Answer: D Difficulty: Moderate Rationale: Mutual funds must disclose portfolio composition quarterly, and trading activity that immediately precedes the reporting date is referred to as "window dressing". The speculation is that window dressing involves changes in portfolio composition, which gives the appearance of successful stock selection. 2. The comparison universe is __________. 3. __________ did not develop a popular method for risk-adjusted performance evaluation of mutual funds. 1
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Chapter 24 Portfolio Performance Evaluation 4. Henriksson (1984) found that, on average, betas of funds __________ during market advances 5. Most professionally managed equity funds generally __________. A) outperform the S&P 500 index on both raw and risk-adjusted return measures B) underperform the S&P 500 index on both raw and risk-adjusted return measures C) outperform the S&P 500 index on raw return measures and underperform the S&P 500 index on risk-adjusted return measures D) underperform the S&P 500 index on raw return measures and outperform the S&P 500 index on risk-adjusted return measures E) match the performance of the S&P 500 index on both raw and risk-adjusted return measures Answer: B Difficulty: Moderate Rationale: Most mutual funds do not consistently, over time, outperform the S&P 500 index on the basis of either raw or risk-adjusted return measures.
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