CFA三级原版书课后题：交易、绩效评估与经理人选择-标准版

CFA三级原版书课后题

讲师：

Reading34

TradeStrategyandExecution

RobertHardingisaportfoliomanageratValleyRise,ahedgefund

basedintheUnitedStates.Hardingmonitorstheportfolioalongside

AndreaYellow,ajunioranalyst.ValleyRiseonlyinvestsinequities,but

Hardingisconsideringotherassetclassestoaddtotheportfolio,

namelyderivatives,fixedincome,andcurrencies.HardingandYellow

meettodiscusstheirtradingstrategiesandpricebenchmarks.

HardingbeginsthemeetingbyaskingYellowaboutfactorsthataffect

theselectionofanappropriatetradingstrategy.YellowtellsHarding:

Statement1Tradingwithgreaterurgencyresultsinlowerexecution

risk.

Statement2Tradinglargersizeorderswithhighertradeurgency

reducesmarketimpact.

Statement3Securitieswithhighratesofalphadecayrequireless

aggressivetradingtorealizealpha.

AfterfurtherdiscussionaboutYellow’sstatements,Hardingprovides

Yellowalistoftradesthathewantstoexecute.HeasksYellowto

recommendapricebenchmark.Hardingwantstouseabenchmark

wherethereferencepriceforthebenchmarkiscomputedbasedon

marketpricesthatoccurduringthetradingperiod,excludingtrade

outliers.

Earlierthatdaybeforethemeeting,Yellowbelievedthatthemarket

hadunderreactedduringthepre-markettradingsessiontoastrong

earningsannouncementfromABCCorp.,acompanythatYellowand

Hardinghavebeenthoroughlyresearchingforseveralmonths.Their

researchsuggestedthestock’sfairvaluewas$90pershare,andthe

strongearningsannouncementreinforcedtheirbeliefintheirfairvalue

estimate.

Rightaftertheearningsannouncement,thepre-marketpriceofABC

was$75.Concernedthattheunderreactionwouldbeshort-lived,

HardingdirectedYellowtobuy30,000sharesofABCstock.Yellowand

Hardingdiscussedatradingstrategy,knowingthatABCsharesarevery

liquidandtheorderwouldrepresentonlyabout1%oftheexpected

dailyvolume.Theyagreedontradingaportionoftheorderatthe

openingauctionandthenfillingtheremainderoftheorderafterthe

openingauction.Thestrategyforfillingtheremainingportionofthe

orderwastoexecutetradesatpricesclosetothemarketpriceatthe

timetheorderwasreceived.

HardingandYellowthenshifttheirconversationtoXYZCorp.Harding

tellsYellowthat,afterextensiveresearch,hewouldliketoutilizean

algorithmtopurchasesomesharesthatarerelativelyliquid.When

buildingtheportfolio’spositioninXYZ,Harding’spriorityistominimize

thetrade’smarketimpacttoavoidconveyinginformationtomarket

participants.Additionally,Hardingdoesnotexpectadverseprice

movementsduringthetradehorizon.

HardingandYellowconcludetheirmeetingbycomparingtrade

implementationforequitieswiththetradeimplementationforthenew

fixed-income,exchange-tradedderivatives,andcurrencyinvestments

underconsideration.YellowtellsHarding:

Statement4Smallcurrencytradesandsmallexchange-traded

derivativestradesaretypicallyimplementedusingthedirectmarket

access(DMA)approach.

Statement5Thehigh-touchagencyapproachistypicallyusedto

executelarge,non-urgenttradesinfixed-incomeandexchange-traded

derivativesmarkets.

Thenextday,HardinginstructsYellowtorevisittheirresearchonBYYP,

Inc.Yellow’sresearchleadshertobelievethatitssharesare

undervalued.ShesharesherresearchwithHarding,andat10a.m.he

instructshertobuy120,000shareswhenthepriceis$40.00usinga

limitorderof$42.00.

Thebuy-sidetraderreleasestheorderformarketexecutionwhenthe

priceis$40.50.Theonlyfeeisacommissionof$0.02pershare.Bythe

endofthetradingday,90,000sharesoftheorderhadbeenpurchased,

andBYYPclosesat$42.50.Thetradewasexecutedatanaverageprice

of$41.42.DetailsabouttheexecutedtradesarepresentedinExhibit1.

Exhibit1BYYPTradeExecutionDetails

Trades

Trade1

Trade2

Trade3

Trade4

Total

30,000

20,000

30,000

90,000

Whilethebuy-sidetraderexecutestheBYYPtrade,HardingandYellow

reviewValleyRise’stradepolicydocument.Afterreviewingthe

document,Yellowrecommendsseveralchanges:1)addapolicyforthe

treatmentoftradeerrors;2)addapolicythatensuresover-the-counter

derivativesaretradedonvenueswithrulesthatensureminimumprice

transparency;and3)alterthelistofeligiblebrokerstoincludeonly

thosethatprovideexecutionatthelowestpossibletradingcost.

Greatertradeurgencyresultsinlowerexecutionriskbecausetheorder

isexecutedoverashorterperiodoftime,whichdecreasesthetimethe

tradeisexposedtopricevolatilityandchangingmarketconditions.In

contrast,lowertradeurgencyresultsinhigherexecutionriskbecause

theorderisexecutedoveralongerperiodoftime,whichincreasesthe

timethetradeisexposedtopricevolatilityandchangingmarket

conditions.

shouldrecommendabenchmarkthatisbasedonthe:

HardingaskedYellowtoexecutealistoftrades,andhewantstouseaprice

benchmarkwherethereferencepriceforthebenchmarkiscomputedbasedon

marketpricesthatoccurduringthetradingperiod,excludingtradeoutliers.

Portfoliomanagersoftenspecifyanintradaybenchmarkforfundsthatare

tradingpassivelyovertheday,seekingliquidity,andforfundsthatmaybe

rebalancing,executingabuy/selltradelist,andminimizingrisk.Anintraday

pricebenchmarkisbasedonapricethatoccursduringthetradingperiod.The

mostcommonintradaybenchmarksusedintradingarevolume-weighted

averageprice(VWAP)andtime-weightedaverageprice(TWAP).Portfolio

managerschooseTWAPwhentheywishtoexcludepotentialtradeoutliers.

B.aTWAPparticipationstrategy.

C.aVWAPparticipationstrategy.

Giventhetradeurgencyoftheorder,theveryliquidmarketforABC

shares,andthesmallordersizerelativetoABC’sexpectedvolume,

Yellowisusinganarrivalpricetradingstrategythatwouldattemptto

executetheremainingsharesclosetomarketpricesatthetimethe

orderisreceived.

WhattypeofalgorithmshouldbeusedtopurchasetheXYZshares

givenHarding’spriorityinbuildingtheXYZpositionandhisbelief

aboutpotentialpricemovements?

A.Scheduledalgorithm

B.Arrivalpricealgorithm

C.Opportunisticalgorithm

XYZsharesarerelativelyliquid,andHardinghasprioritizedminimizingthe

trade’smarketimpacttoavoidconveyinginformationtomarketparticipants.

Hardingalsodoesnotexpectadversepricemovementsduringthetrade

horizon.Scheduledalgorithmsareappropriateforordersinwhichportfolio

managersortradersdonothaveexpectationsforadversepricemovement

duringthetradehorizon.Thesealgorithmsarealsousedbyportfoliomanagers

andtraderswhohavegreaterrisktoleranceforlongerexecutiontimeperiods

andaremoreconcernedwithminimizingmarketimpact.Scheduledalgorithms

areoftenappropriatewhentheordersizeisrelativelysmall(e.g.,nomorethan

5%–10%ofexpectedvolume),thesecurityisrelativelyliquid,ortheordersare

partofarisk-balancedbasketandtradingallordersatasimilarpacewill

maintaintheriskbalance.

WhichofYellow’sstatementsregardingthetradeimplementationof

Smallcurrencytradesareusuallyimplementedusingdirectmarket

access(DMA).Buy-sidetradersgenerallyuseDMAforexchange-

tradedderivatives,particularlyforsmallertrades.

BasedonExhibit1,theexecutioncostforpurchasingthe90,000shares

Executioncostiscalculatedasthedifferencebetweenthecostofthereal

portfolioandthepaperportfolio.Itreflectstheexecutionprice(s)paidforthe

numberofsharesintheorderthatwereactuallyfilledorexecuted.The

executioncostiscalculatedas:

푆푃−

푗푗

푆푃

푗푑

=[(10,000shares×$40.75)+(30,000shares×$41.25)+(20,000shares

×$41.50)+(30,000shares×$41.75)]–(90,000×$40.00)

=$3,727,500–$3,600,000

Opportunitycostisbasedonthenumberofsharesleftunexecutedin

theorderandreflectsthecostofnotbeingabletoexecuteallshares

atthedecisionprice.Theopportunitycostiscalculatedas:

=(120,000–90,000)×($42.50–$40.00)

=$75,000

0)

4

($41.42−$40.50)

=+1×

$40.50

4

Asitrelatestothetradepolicydocument,ValleyRiseshouldimplement

Firmsshouldhaveapolicyinplaceforthetreatmentoftradeerrors.

Errorsfromtradingandanyresultinggains/lossesneedtobe

disclosedtoafirm’scompliancedepartmentanddocumentedina

tradeerrorlog.Thetradeerrorlogshouldincludeanyrelated

documentationandevidencethattradeerrorsareresolvedinaway

thatavoidsadverseimpacttotheclient.

Reading35

PortfolioPerformanceEvaluation

AlexandraJones,asenioradviseratFederalistInvestors(FI),meetswith

ErinBragg,ajunioranalyst.Braggjustcompletedamonthly

performanceevaluationforanFIfixed-incomemanager.Bragg’sreport

addressesthethreeprimarycomponentsofperformanceevaluation:

measurement,attribution,andappraisal.JonesasksBraggtodescribe

aneffectiveattributionprocess.Braggrespondsasfollows:

Response1:Performanceattributiondrawsconclusionsregardingthe

qualityofaportfoliomanager’sinvestmentdecisions.

Response2:Performanceattributionshouldhelpexplainhow

performancewasachievedbybreakingapartthereturnorriskinto

differentexplanatorycomponents.

Braggnotesthatthefixed-incomeportfoliomanagerhasstrongviews

abouttheeffectsofmacroeconomicfactorsoncreditmarketsand

followsatop-downinvestmentprocess.

JonesreviewsthemonthlyperformanceattributionandasksBragg

whetheranyrisk-adjustedhistoricalperformanceindicatorsare

available.Braggproducesthefollowingdata:

Exhibit110-YearTrailingRisk-AdjustedPerformance

Sortinoratio

0.87

Upsidecapture

0.66

C.BothResponse1andResponse2

Performanceattributionhelpsexplainhowperformancewasachieved;

itbreaksapartthereturnorriskintodifferentexplanatorycomponents.

Effectiveperformanceattributionmustaccountforalloftheportfolio’s

returnorriskexposure,reflecttheinvestmentdecision-makingprocess,

quantifytheactivedecisionsoftheportfoliomanager,andprovidea

completeunderstandingoftheexcessreturn/riskoftheportfolio.

Themostappropriateriskattributionapproachforthefixed-income

A.decomposehistoricalreturnsintoatop-downfactorframework.

B.evaluatethemarginalcontributiontototalriskforeachposition.

C.attributetrackingrisktorelativeallocationandselectiondecisions.

Theportfolioismanagedagainstabenchmark,whichindicatesa

relative-risktypeofriskattributionanalysis.Foratop-down

investmentapproach,theanalysisshouldattributetrackingriskto

allocationandselectiondecisionsrelativetothebenchmark.

BasedonExhibit1,thetargetsemideviationfortheportfolioisclosest

Thetargetsemi-standarddeviationortargetsemideviationisthe

denominatoroftheSortinoratio.ThenumeratoroftheSortinoratiois

theaverageportfolioreturnminusthetargetrateofreturn(minimum

acceptablereturn,orMAR).

(AverageportfolioreturnMAR)

Sortinoratio=

SubstitutingthevaluesprovidedinExhibit3,thetargetsemideviation

isasfollows:

8.20%−5.00%

Targetsemideviation=

=3.678%=3.68%

0.87

C.thattheportfoliogenerateshigherreturnsthanthebenchmark

duringallmarketconditions.

Theupside/downsidecapture,orsimplythecaptureratio(CR),isthe

upsidecaptureratiodividedbythedownsidecaptureratio.

Acaptureratiogreaterthan1indicatespositiveasymmetryofreturns,

oraconvexreturnprofile.

ThemaximumdrawdownanddrawdowndurationinExhibit1indicate

B.overthe10-yearperiod,theaveragemaximumlosswas–24.00%.

C.asignificantlossoncepersistedforfourmonthsbeforethe

portfoliobegantorecover.

Maximumdrawdownisthecumulativepeak-to-troughlossduringa

continuousperiod.Drawdowndurationisthetotaltimefromthestart

ofthedrawdownuntilthecumulativedrawdownrecoverstozero,

whichcanbesegmentedintothedrawdownphase(starttotrough)

andtherecoveryphase(troughtozerocumulativereturn).The

maximumdrawdownwas–24.00%,withadrawdownperiodoffour

months.Giventhe10-yeartimeframe,theportfoliorecoveredquickly

fromitsmaximumloss.

StephanieTolmachisaconsultanthiredtocreateaperformanceattribution

reportonthreefundsheldbyadefinedbenefitpensionplan(thePlan).

Fund1isadomesticequitystrategy,Fund2isaglobalequitystrategy,and

Fund3isadomesticfixed-incomestrategy.

Tolmachusesthreeapproachestoattributionanalysis:thereturn-based,

holdings-based,andtransaction-basedapproaches.ThePlan’sinvestment

committeeasksTolmachto(1)applytheattributionmethodthatusesonly

eachfund’stotalportfolioreturnsoverthelast12monthstoidentify

return-generatingcomponentsoftheinvestmentprocessand(2)include

theimpactofspecificactiveinvestmentdecisionsandtheattribution

effectsofallocationandsecurityselectioninthereport.

TolmachfirstevaluatestheperformanceofFund1byconstructinga

*

(4)

16.32%

–3.25%

–9.60%

3.38%

7.33%

50.53%

–10.17%

174.49%

–274.49%

100.00%

*RMRFisthereturnonavalue-weightedequityindexinexcessoftheone-monthT-billrate,SMBis

thesmallminusbigmarketcapitalizationfactor,HMListhehighminuslowfactor,andWMListhe

winnersminuslosersfactor.

TolmachturnsherattentiontoFund2,constructingaregion-based

microattributionanalysistoevaluatetheactivedecisionsofthe

portfoliomanager.TheresultsarepresentedinExhibit2.

Exhibit2Fund2Performance—AllocationbyRegion

PortfolioBenchmark

PortfolioBenchmark

ReturnReturn

16.50%16.47%

GreaterEurope

42.35%

23.16%

25.43%

Asia

and

29.86%

31.16%

11.33%

12.85%

20.38%

100.00%

18.82%

100.00%

20.00%

18.26%

35.26%

22.67%

Next,TolmachevaluatesFund3andtheappropriatenessofits

benchmark.Thebenchmarkisacap-weightedbondindexwithdaily

reportedperformance;theindexisrebalancedfrequently,makingit

difficulttoreplicate.Thebenchmarkhasameaningfulinvestmentin

foreignbonds,whereasFund3investsonlyindomesticbonds.

Inthefinalsectionofthereport,TolmachreviewstheentirePlan’s

characteristics,assetallocation,andbenchmark.Tolmachobservesthat

thePlan’sbenefitsarenolongerindexedtoinflationandthatthe

workforceis,onaverage,youngerthanitwaswhenthecurrentfund

allocationswereapproved.Tolmachrecommendsachangeinthe

Plan’sassetallocationpolicy.

A.istheleastaccurate.

Thecommitteedescribedareturn-basedattribution,whichistheleast

accurateofthethreeapproaches(thereturn-based,holdings-based,

transaction-basedapproaches).Return-basedattributionusesonlythe

totalportfolioreturnsoveraperiodtoidentifythecomponentsofthe

investmentprocessthathavegeneratedthereturns.

BasedonExhibit1andrelativetothebenchmark,themanagerofFund

1mostlikelyuseda:

Basedonthefactorsensitivitiesincolumn1(negativesensitivityof–

0.17toHML)andthedifferencesrelativetothebenchmarkshownin

column3,themanagerlikelyhadagrowthtilt.

BasedonExhibit1,whichofthefollowingfactorscontributedtheleast

Withanabsolutereturnof0.29%andwith7.33%ofthecontribution

toreturn,SMBcontributedfarlessthanHML(2.02%and50.53%,

respectively)andRMRF(5.06%and126.80%,respectively).

BasedonExhibit1,themanagercouldhavedeliveredmorevalueto

theportfolioduringtheinvestmentperiodbyweightingmoretoward:

Hadthemanagerweightedmoretowardmomentumstocksduring

theperiod,themomentumfactor(WML)returnof3.38%wouldhave

contributedpositivelytotheportfolio.

AisincorrectbecausetheHMLfactorreturnwas–9.60%;thus,

weightingmoretowardvaluestockswouldhavedetractedfrom

portfolioreturns.

BisincorrectbecausetheSMBfactorreturnwas–3.25%;thus,

weightingmoretowardsmall-capstockswouldhavedetractedfrom

portfolioreturns.

BasedonExhibit2,theallocationeffectforSouthAmericaisclosestto:

TheallocationeffectforSouthAmericais0.20%.

푖

푖

=(20.38%–18.82%)(35.26–22.67%)

=0.1964%=0.20%

BasedonExhibit2,thedecisiontooverweightorunderweightwhichof

thefollowingregionscontributedpositivelytoperformanceatthe

overallfundlevel?

C.DevelopedAsiaandAustralasia

ThedecisiontounderweightdevelopedAsiaandAustralasiawasa

goodonebecausethebenchmarkforthisregionunderperformedthe

totalbenchmark(12.85%versus22.67%).Alternatively,thequestion

canbeansweredbycalculatingtheallocationeffectsforthethree

regions,asfollows:

푖

푖

DevelopedAsiaandAustralasiaistheonlyregionofthethreethathad

apositiveallocationeffect.

BasedonExhibit2,theunderperformanceattheoverallfundlevelis

Thetotal–441bpsofunderperformancefromsecurityselectionand

interactionattheoverallfundlevelispredominantlytheresultofpoor

SouthAmericansecurityselectiondecisions(–311bps=3.11%).

ReturnAttribution

(SegmentLevel)

NorthAmerica

GreaterEurope

DevelopedAsiaandAustralasia

SouthAmerica

Allocation

Total

Total

푖

푖

ii

i

i

ii

NorthAmerica=7.67%(16.50%–16.47%)+(10.84%–7.67%)(16.50%–16.47%)

=0.00%

ThebenchmarkforFund3haswhichofthefollowingcharacteristicsof

avalidbenchmark?

Dailyreportedperformanceisavailableforthebenchmark;thus,itispossible

tomeasurethebenchmark’sreturnonareasonablyfrequentandtimelybasis.

Aisincorrectbecausethebenchmarkisacap-weightedbondindexthatis

rebalancedfrequently,makingitdifficulttoreplicate.Forabenchmarktobe

investable,itmustbepossibletoreplicateandholdthebenchmarktoearnits

return(atleastgrossofexpenses).Thesponsorshouldhavetheoptionof

movingassetsfromactivemanagementtoapassivebenchmark.Ifthe

benchmarkisnotinvestable,itisnotaviableinvestmentalternative.Bond

indexesareoftennotinvestableandarerebalancedfrequentlyovertime.

Cisincorrectbecausetheindexhasameaningfulinvestmentinforeignbonds,

whereasFund3investsonlyindomesticbonds,makingthebenchmark

inappropriate.Thebenchmarkmustbeconsistentwiththemanager’s

investmentstyleorareaofexpertise.

BasedonthefinalsectionofTolmach’sreport,thePlanshoulduse:

A.aliability-basedbenchmark.

BasedonthePlan’stype(definedbenefit)anditscharacteristicsas

detailedinthefinalsectionofTolmach’sreport,aliability-based

benchmarkismostappropriate.Liability-basedbenchmarksareused

mostfrequentlywhenassetsarerequiredtopayaspecificfuture

liability,asinadefinedbenefitpensionplan.

Reading36

InvestmentManagerSelection

Case:TreeFallersEndowment

TheTreeFallersEndowmentplanstoallocatepartofitsportfolioto

alternativeinvestmentfunds.TheendowmenthashiredKurtSummer,a

consultantatSummerBrothersConsultants,toidentifysuitable

alternativeinvestmentfundsforitsportfolio.

Summerhasidentifiedthreefundsforpotentialinvestmentandwill

presenttheperformanceoftheseinvestmentstotheendowment’s

boardofdirectorsattheirnextquarterlymeeting.

Summerisreviewingeachofthefund’sfeeschedulesandisconcerned

aboutthemanager’sincentivetotakeonexcessriskinanattemptto

generateahigherfee.Exhibit1presentsthefeeschedulesofthethree

funds.

Case:TreeFallersEndowment

Base

Fee

Higherofeither(1)baseor(2)baseplus

sharingofpositiveperformance;sharingis1.00%

basedonreturnnetofthebasefee.

BlueWatersharingofpositiveperformance,uptoa

Baseplussharingofbothpositiveand

negativeperformance;sharingisbasedon1.50%

returnnetofthebasefee.

Case:TreeFallersEndowment

Exhibit2presentstheannualgrossreturnsforeachfundandits

respectivebenchmarkfortheperiodof2016–2018.Allfundshavean

inceptiondateof1January2016.Summerintendstoincludeinhis

reportanexplanationoftheimpactofthefeestructuresofthethree

fundsonreturns.

Case:TreeFallersEndowment

2016

8.00

Case:TreeFallersEndowment

TheboardofdirectorsoftheTreeFallersEndowmentasksSummerto

recalculatethefeesoftheRedGrassFundassumingahigh-watermark

featurewherebyasharingpercentagecouldonlybechargedtothe

extentanylosseshadbeenrecouped.

Case:TreeFallersEndowment

B.BlueWater

C.YellowWood

Case:TreeFallersEndowment

Asymmetricalfeestructureisoneinwhichthefeesareaffectedby

bothpositiveandnegativeperformance.OfthethreefundsinExhibit

1,onlyYellowWoodhasasymmetricalstructure.YellowWood’sprofit

sharingcomponentwillbenegativeifitsreturnisnegativeand

positiveifitispositive.

Case:TreeFallersEndowment

BasedonthefeeschedulesinExhibit1,theportfoliomanagerofwhich

fundhasthegreatestincentivetoassumeadditionalrisktoearna

higherinvestmentmanagementfee?

B.BlueWater

C.YellowWood

Case:TreeFallersEndowment

RedGrass’sfeearrangementallowsforunlimitedperformance-based

feesontheupsideandnonegativeconsequencesonthedownside.

Case:TreeFallersEndowment

Case:TreeFallersEndowment

Thefund’sfeescheduleincludesabasefeeof1.50%anda20%

performance-basedfee.Theperformance