Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question E (50 points) You are a senior manager SMIF^2, a quantitative investing fund focused on US equities. Your analyst Yeswell Sortov brings you a

image text in transcribed

Question E (50 points) You are a senior manager SMIF^2, a quantitative investing fund focused on US equities. Your analyst Yeswell Sortov brings you a new quantitative signal he has just backtested. The signal is based on surveys among managers employed at each Russell 3000 corporation. He claims that his backtest shows that stocks with high Managerial Satisfaction Ratings (MSR) tend to be good investments on average. His analysis uses a list containing MSRs for all Russell3000 firms for the year of 2019. He sorts the stocks on that list into three groups: HIGH MSR (top 30%), MEDIUM MSR (40%), and LOW MSR (top 30%). Then he calculates equally-weighted averages of stocks returns for those three groups over the ten year period 2010-2019. The results are below. As a senior manager, you have to analyze Sortov's results. Group Average Return (2010-2019) HIGH MSR 7.5% per year MEDIUM MSR 15% per year LOW MSR - 2% per year Question 24) Is there SPREAD? Question 25) Is there GRADATION? Question 26) Sortov's analysis has problems. How would you fix them? That is, what would you do instead? (3 buckets is ok!) Question 27) Can you see a specific reason why his results might be misleading? In other works, can you reason why results come up the way they do even though MSR might not forecast relative returns? Explain

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate And Project Finance Modeling Theory And Practice

Authors: Edward Bodmer

1st Edition

1118854365, 9781118854365

More Books

Students also viewed these Finance questions

Question

How flying airoplane?

Answered: 1 week ago