Wealth-Forum e-zine

Test your understanding of this topic

Q1.

If an investor is looking to pick a fund for long term wealth creation, which of these funds seem better suited towards that objective ?

(a) Fund A which has a beta of 1.3 and an alpha of 1.5

(b) Fund B which has a beta of 0.9 and an alpha of 4.5

Q2.

If an investor is looking to cash in on an expected near term bullish phase in the market, which of these funds should he pick ?

(a) Fund A which has a beta of 1.4

(b) Fund B which has an alpha of 1.4

Q3.

The best measure of a fund manager’s stock picking ability is the fund’s:

(a) alpha

(b) beta

Q4.

An alpha of -2% means:

(a) The fund is likely to provide returns 2% less than the market in times to come

(b) The fund has not been able to beat its benchmark index in the past

Q5.

In a bullish market, a fund with a beta of 1.2 should :

(a) Outperform the market

(b) Underperform the market