Question
Roy is a mutual fund manager who specializes in investing in U.S. large-cap stocks. As a mutual fund manager, he accepts money from existing and
Roy is a mutual fund manager who specializes in investing in U.S. large-cap stocks. As a mutual fund manager, he accepts money from existing and new investors who want to invest in the fund. He also redeems shares for investors who want to cash out and no longer want to invest. In other words, Roy does not have any control over the mutual funds cash inflows and outflows. Imagine that you are a member on the board of directors who evaluate Roys performance. Which of the various return measures that you have learned in class is the most appropriate to evaluate Roys performance (i.e. performance of a mutual fund manager)? And more importantly WHY? (Note: You must clearly explain your reasons in order to receive full credit)
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