“COMPARED TO WHAT

5. “Compared to What? A Debate on Picking Benchmarks” (Study Session 16)

b) discuss the potential problems (e.g., fund misclassification, stocks changing style,

funds changing style, funds with multiple styles, similarities between categories, and

inappropriate evaluation of manager’s performance) that are present in using the

style/size category approach;

c) discuss the potential problems (e.g., fund misclassification, shifting fund exposure,

and inappropriate evaluation of managers’ performance) that are present in return-

based style analysis;

d) evaluate the arguments in favor of narrow-based benchmarks as opposed to broad

market-based benchmarks.

Guideline Answer:

Part A

Criticisms of Stewart’s portfolio-based style analysis of Temple Group’s performance for 2004

include: