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You have been asked by your boss to analyze the returns of the hedge-fund industry. a. Very briefly discuss how you would construct an asset

You have been asked by your boss to analyze the returns of the hedge-fund industry.

a. Very briefly discuss how you would construct an asset pricing model specifically to evaluate the returns of the hedge-fund industry, or which one you would choose (or modify) among those discussed in class. Give the economic motivation behind your choice.

b. What result would you expect to observe in the data regarding the abnormal returns of the hedge-fund industry, conditional on the CAPM, versus the abnormal returns conditional on the asset pricing model that you decided to choose in step a) above? Why?

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