CAIA - 28 - Hedge Funds: Directional Strategies Flashcards Preview

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Flashcards in CAIA - 28 - Hedge Funds: Directional Strategies Deck (54)
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1

The ___ form of the EMH states that prices reflect historical information.

The weak form of the EMH states that prices reflect historical information.

2

The ___-___form of the EMH states that prices reflect historical information and currently available public information.

The semi-strong form of the EMH states that prices reflect historical information and currently available public information.

3

The ___ form of the EMH states that prices reflect historical informational and all public and private current information.

The strong form of the EMH states that prices reflect historical informational and all public and private current information.

4

___ form efficiency implies that technical analysis cannot work.

Weak form efficiency implies that technical analysis cannot work.

5

The semi-strong EMH (does/does not/somewhat) holds.

The semi-strong EMH somewhat holds.

6

The strong EMH (does/does not/somewhat) hold

The strong EMH does not hold

7

The weak form of EMH (does/does not/somewhat) hold.

The weak form of EMH does hold.

8

A ___ ___occurs when an undervalued security remains undervalued for a prolonged period due to various reasons.

value trap occurs when an undervalued security remains undervalued for a prolonged period due to various reasons.

9

A ___ ___occurs when price increases force short sellers to cover their positions, which further increases prices.

short squeeze occurs when price increases force short sellers to cover their positions, which further increases prices.

10

The ___ ___ ___ states that leverage-constrained investors drive up high-beta assets, which results in negative alphas.

The leverage aversion theory states that leverage-constrained investors drive up high-beta assets, which results in negative alphas.

11

A ___ ___ ___ strategy involves taking long positions in low-beta assets and short positions in high-beta assets.

betting against beta strategy involves taking long positions in low-beta assets and short positions in high-beta assets.

12

In ___-sentiment periods, investors appear to behave rationally with regard to CAPM and the accrual anomaly; however, in ___-sentiment periods, investors overpay for high-beta and high-accrual stocks.

In low-sentiment periods, investors appear to behave rationally with regard to CAPM and the accrual anomaly; however, in strong-sentiment periods, investors overpay for high-beta and high-accrual stocks.

13

___ generally results in investors overtrading their portfolios and thus incurring large transaction costs and reduced returns.

Overconfidence generally results in investors overtrading their portfolios and thus incurring large transaction costs and reduced returns.

14

___ refers to people being biased due to their prior views and not incorporating new information appropriately.

Anchoring refers to people being biased due to their prior views and not incorporating new information appropriately.

15

___ ___refers to selectively using evidence that supports a prior belief.

Confirmation bias refers to selectively using evidence that supports a prior belief.

16

___ ___/___ ___ refers to the notion that investors prefer to avoid losses than acquire gains.

Loss aversion/disposition effect refers to the notion that investors prefer to avoid losses than acquire gains.

17

The ___ ___maintains that investors underweight outcomes that are probable compared to those that are certain.

The prospect theory maintains that investors underweight outcomes that are probable compared to those that are certain.

18

Fundamental equity long/short is a ___ investment strategy.

Fundamental equity long/short is a directional investment strategy.

19

Equity long/short managers typically have a ___ concentrated portfolio, ___turnover and ___holding periods than market-neutral or statistical arbitrage managers.

Equity long/short managers typically have a more concentrated portfolio, lower turnover and longer holding periods than market-neutral or statistical arbitrage managers.

20

The ___ ___ ___ estimates the current value of a stock as a present value of the expected future dividend payments.

The gordon growth model estimates the current value of a stock as a present value of the expected future dividend payments.

21

Gordon Growth Model (Equation - no growth in dividend) 

22

Gordon Growth Model with Constant Growth (equation)

23

Enterprise value (equation)

EV = Equity +Debt - Cash

 

Equity + Debt = Total Value of Assets

24

Free Cash Flow to Firm (Equation)

Net Income

+ Non-cash Charges

+ Interest Expense(1 - Tax)

- Investments in Fixed Assets and Working Capital

25

Enterprise Value estimated using FCFF (Equation)

26

Enterprise Value estimated using FCFF and assuming constant growth (equation)

27

A recent study confirms that activist hedge funds (have/have not) been successful the past few years.

A recent study confirms that activist hedge funds have been successful the past few years.

28

Dupont Model (Equation)

29

(CTAs/global macro) are reactive, whereas (CTAs/global macro) managers are anticipatory.

CTAs are reactive, whereas global macro managers are anticipatory.

30

(CTAs/global macro) focus only on prices

CTAs focus only on prices

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