1.Using the S&P 500 as a benchmark for a hedge fund is:

A. a good choice because the S&P 500 is a widely observed measure that is easy to explain to clients and is investable--a requirement for a good benchmark.

B. a poor choice because the S&P 500 is based on a short term buy and sell investment strategy which does not fit with most hedge fund strategies.

C. a good choice because the S&P 500 is a broad market index, unlike the Dow Jones Industrial Average.

D. a poor choice because hedge funds typically employ a substantial amount of leverage and engage in short selling. The S&P 500 does not measure leverage or short sales.