*passive fund before fees = stock index = 6% + Ut reactive fund before fees =...
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*passive fund before fees = stock index = 6% + Ut reactive fund before fees = 1.80% +1.1 stock index + Et where the error terms u and are independent over time and of each other, have zero means E(u) = E(&) = 0, and volatilities of var(u) = 15% and (var(+) = 4%. The hedge fund uses the same strategy as the active mutual fund, but implements the strategy as a long-short hedge fund, applying 4 times leverage, generating the following return before fees: hedge fund before fees 4 * (reactive fund before fees - stock index) Question 2 What is the hedge fund's beta? O a. 0.1 O b. 0.04 O c. 0.4 O d. 1.1 O e. 4.4 f. 0 *passive fund before fees = stock index = 6% + Ut reactive fund before fees = 1.80% +1.1 stock index + Et where the error terms u and are independent over time and of each other, have zero means E(u) = E(&) = 0, and volatilities of var(u) = 15% and (var(+) = 4%. The hedge fund uses the same strategy as the active mutual fund, but implements the strategy as a long-short hedge fund, applying 4 times leverage, generating the following return before fees: hedge fund before fees 4 * (reactive fund before fees - stock index) Question 2 What is the hedge fund's beta? O a. 0.1 O b. 0.04 O c. 0.4 O d. 1.1 O e. 4.4 f. 0
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