1) The Eurekahedge indices are a set of indices that track specific types of hedge funds. In this exercise we want to ev

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1 The Eurekahedge Indices Are A Set Of Indices That Track Specific Types Of Hedge Funds In This Exercise We Want To Ev 1 (174.69 KiB) Viewed 29 times

1) The Eurekahedge indices are a set of indices that track specific types of hedge funds. In this exercise we want to evaluate and determine the factors that determine the returns generated by EHF1251, an index of long-short hedge fund performance. We will compare this to the Rusell 2000 performing CAPM analysis yielding the following regression chart: EHF1251 y = 0.1748x + 0.0032 R2 = 0.5285 6.00% 4.00% 2.00% -0.00% -25.00% -20.00% -15.00% 10.00% 5.00% 0.00% 5.00% 10.00% 15.00% 20.00% -2.00% -4.00% -6.00% EHF1251 ......... Linear (EHFI 251) Based off the above chart, please answer the following questions. a) What does R-squared represent in this problem? What can you say about the CAPM Model in this regression? (5 pts) b) What is the Beta for EHFI 251? What does Beta imply here for EHFI 251 if we see a 1% move in the Russell 2000? (5 pts pts) c) What number do we use to determine the alpha of EHFI 251? What is that number according to the CAPM? (5 pts)