Business Administration - Financial Planning RFC230 Lecture Notes - Lecture 4: Market Neutral, Absolute Return, Russell 2000 Index
6 Mar 2017
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Document Summary
5 and 6 3 investment selection process and evaluation. Sector rotation: overweight sectors that will outperform in various economic cycles. Momentum: purchase equities that have had strong earnings or stock price gains on believe that trend will continue, momentum managers use technical or quantitative analysis, high-risk / high-return strategy, concentration risk and high turnover. Relative returns (relative to peer group and benchmark) Results from consistent application of investment style. Absolute return history (typically for market neutral alternative investments) Style analysis: consistency of adherence to investment style, essential in measuring manager skill in security selection. Returns-(cid:271)ased style a(cid:374)alysis: fu(cid:374)d"s perfor(cid:373)a(cid:374)(cid:272)e relative to a specific benchmark. Eg. small cap u. s. value manager measured against. Russell 2000 value index: sometimes challenging to identify appropriate benchmark. Customized indices can be created (blend of standard indices) Morningstar assesses equity mutual funds according to: star rating: Risk-adjusted return of fund relative to its peer group.
