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:
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