$2$

$.$

$$Exercises for Evaluating Trading Strategies: Performance Measures

For each of the following exercises, consider the hedge fund index data provided and evaluate the performance

$($

abstracting here from the potential biases in the data

$)$

$.$

$2$

$.$

$1$

$.$

$$Performance measures. For each hedge fund style, calculate and interpret the following performance measures

a

$.$

$$Annualized arithmetic average return

b

$.$

$$Annualized geometric average return

c

$.$

$$Annualized volatility of excess returns

d

$.$

$$Annualized Sharpe ratio

e

$.$

$$Market beta

f

$.$

$$Annualized alpha to the market

g

$.$

$$Annualized Information ratio

h

$.$

$$Maximum drawdown

i

$.$

$$Skewness of monthly excess returns

j

$.$

$$Excess kurtosis of monthly excess returns

$2$

$.$

$2$

$.$

$$Cumulative return and drawdown. Make the following plots for Global Macro Hedge Fund index

a

$.$

$$The cumulative return

b

$.$

$$The drawdown