True or False

1. Low volatility strategies employ a systematic process to build a portfolio of undervalued companies selected from approximately 1,000 mid-sized to large U.S. companies. A 130/30 low-volatility strategy holds short positions of 30 % of the portfolio’s capital to potentially add value. The Russell 1000 Index is an appropriate benchmark index for the strategies; its returns are provided to represent the investment environment existing during the time periods shown. For comparison purposes, the index is fully invested, which includes the reinvestment of income. Index returns do not include any transaction costs, management fees, or other costs.

 true false

2. Martingale generated its investment research internally

 true false

3. Martingale used different criteria to rank stocks within an industry from undervalued to overvalued

 true false

4.Martingale Asset Management used Google trends in their investing strategy

 true false

5. Trading costs in a short extension fund were lower than in a long-only portfolio due to the higher stock turnover

 true false

6. The historical experience was consistent with the notion that greater risk was rewarded with higher expected return

 true false

7. Back-testing consisted of running a strategy using historical data to determine how the strategy would have performed in different market environments, had it been implemented in the past

 true false

8. Funds sometimes use different amounts of leverage so that a 120 long and 20 short is called a “120/20.”

 true false

9. The information ratio and the Sharpe ratio are the same.

 true false

10. Jacques believed that markets were not perfectly efficient all the time.

 true false

11. Martingale participated in soft dollar trading.

 true false

12. The benefit of short extension is that it allows fund managers to express positive and negative views on expected individual stock returns than in a long-only fund.

 true false

Multiple Choice

13. Martingale Asset Management is a:

 central bank financial stability authority investment management firm commercial bank

14.Identify which of the following are equity characteristics:

 Return on equity P/E Annualized return Earnings growth rate

15.Martingale Asset Management is a company from:

 Boston New York Chicago Atlanta

16.Martingale’s investment team believed:

 Markets were relatively efficient in the long run Mispricing anomalies existed in the financial markets They can identify market anomalies using research Mispricing was generated by investors’ emotions that interfered with sound judgement

17. Identify the correct sentences about Martingale’s LargeCap Value 200 strategy:

 It was launched in 1996 It believed that investors underweighted the largest stocks in the market It required investment in the top 200 stocks in the Russell 1000 Index It was a quantitative value strategy

18. Identify the correct sentences:

 Martingale Asset Management was one of the first asset management firms to offer short extension funds in 2004 A short extension strategy sought to enhance the return on a benchmark index by relaxing the long-only constraint in traditional active portfolios, while keeping the beta exposure with respect to the benchmark at one Analysts did not expect that traditional asset managers would move actively into the short extension funds area A structure popular among short extension funds included a short exposure of 130 % of equity capital and a long exposure of 30 %

19. Short extension funds are also known as:

 130/30 funds Enhanced alpha Alpha tilts Short enabled Limited shorting Information efficient

20. Martingale was one of the first asset managers to offer short extension funds in 2004. By early 2008, Martingale offered four funds based on the 130/30 model. Each fund tracked one benchmark index and was designed to be neutral to the benchmark in factors such as:

 Size Style Sector Beta Volatility

21. In particular, a study of the largest (by market capitalization) 1,000 U.S. stocks from 1968 to 2005 found that stock portfolios constructed to have minimum variance had about . . . . of the risk of the market capitalization weighted portfolio, while achieving approximately the same or . . . . average return. Source: Roger Clarke, Harinda de Silva, and Steven Thorley, “Minimum-Variance Portfolios in the U.S. Equity Market,” Journal of Portfolio Management (Fall 2006).

 75 %; greater 75 %; less 50 %; greater 25 %; greater

22. Martingale has developed the following versions of its own MV strategy:

 A long-only strategy with no stock alphas (pure minimum variance) A long-only strategy using Martingale’s stock alpha model A 130/30 strategy with no stock alphas A 130/30 strategy with Martingale’s stock alphas (130/30 minimum variance plus alpha)

23.Recent studies regarding risk anomaly in the equity markets made by academics in . . . . . and in . . . showed that this was a worldwide phenomenon.

 U.S.; U.K. U.S.; Japan U.S.; Netherlands Japan; U.K.

24.Jacques had thought about several possibilities that might explain the persistence of the risk anomaly in the equity market.

 A reflection of the costs and the aversion of investors to short selling The divergence of opinions about future prospects for the stock the volatility effect was driven by the inability of many institutional clients to tolerate high tracking error Monetary policy measures

25. List of Martingale Fund Category at June 30, 2008:

 Large Cap Equities Mid Cap Equities Small Cap Equities Short Extension Equity Market Neutral

26. Min-var, Bayesian shrinkage:

 Unconstrained Factor constrained Sensitivity constrained None of the above

27. What does the portfolio’s expected active return divided by the tracking error equal?

 Return on Equity Return on Assets Sharpe Ratio Information Ratio

28. Identify the correct sentences about Martingale Asset Management:

 It used a proprietary, multifactor, security valuation model It valued stocks based on ratios such as price-one-year forward earnings and price-cash earnings It found undervalued stocks by looking at growth characteristics such as internally sustainable growth rates The valuation model also included relative strength, management quality and analysts’ earnings estimate revisions

29. The optimal shorting ratio in a short extension fund depended on the following factors:

 The ability of the manager to identify profitable risk-adjusted investment opportunities The investor tolerance for tracking error

30. Early research on the impact of portfolio constraints on the performance of active stock investment strategies suggested that a 20 % to 30 % shorting ratio was enough to optimize the information ratio for typical tracking errors of:

 . 3 % to 6 % 2 % to 10 % 3 % to 4 % 10 % to 15 %

31. The maximum amount of credit that the Federal Reserve Board allowed brokerage firms and dealers to extend to customers for the purchase of securities on margin (Regulation T).

 5% 15% 50% 75%

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Status NEW Posted 29 Jan 2018 04:01 PM My Price 12.00

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