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 bases in the date. ) Performance measures For each nedge fund st'e calculate and interpret the following performance measures a. Annualized arithmetic average return Annualized geometric average return C. Annualized olatility d. Annualized Sharpe ratio e Market beta f. Annualized alpha to the market 3. Annualized information ratio h. Maximum drawdown -kewness j. Encess kurtosis 2.2. Cumulative return and draw down . lake the following plots for Global Macro riedge . und index a. The cumulative return b. : he drawdown 2.3. Factor models. For Equity Long/Short, run two regressions : (i) a univariate regression of the hedge fund index's excess return on market excess return; and ii) a multivariate regression on the market, size, value, and momentum factors . a. Interpret the loadings on the different factors. What do we learn of the investment style? b. Compare the multivariate alpha with the alpha from the univariate market regression . Discuss the difference in interpretation between the univariate vs. multivariate alphas. 2.4. Illiquidity and stale prices. For Convertible Bond Arbitrage , compare : a. The beta in a monthly univariate regression on the market b. The Jeta in a univariate regression on the market using 3-month returns. (The regression coefficients can still be estimated by running the regression monthly , i.e., with overlapping data, but, in this case, t-statistics need to be adjusted if you were to consider these) C. The sum of betas in a monthly regression on the market, the 1-month lagged market, and the 2- month lagged market