university of southern california Operations And Supply Chain Management Assignment Help - financial crisis

Question - Rick Masler is considering the performance of the managers of two funds, the HCM Fund and the
GRT Fund.
He uses a linear regression of each manager’s excess returns (ri) against the excess returns of a
peer group (rB):
ri = ai + bi * rB + ei
The information he compiles is as follows:
Fund Initial Equity Borrowed Funds Total Investment Pool ai bi
HCM USD 100 USD 0 USD 100 0.0150 0.9500
(t = 4.40) (t = 12.1)
GRT USD 500 USD 3,000 USD 3,500 0.0025 3.4500
(t = 0.002) (t = 10.20)
Based on this information, which of the following statements is correct?
a. The regression suggests that both managers have greater skill than the peer group.
b. The ai term measures the extent to which the manager employs greater or lesser a ...Read More mounts of
leverage than do his/her peers.
c. If the GRT Fund were to lose 10% in the next period, the return on equity (ROE) would be -60%.
d. The sensitivity of the GRT fund to the benchmark return is much higher than that of the HCM fund. ...Read Less

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