Q. Which of Shaw’s comments about the MFC Value Fund in Exhibit 1 is most accurate? The comment concerning:
A) alpha.
B) small-cap tilt.
C) value being out of favor.
Solution
B is correct. Shaw’s comment about a small-cap tilt is correct. Additional exposure to smaller firms resulted in a positive performance of 0.02% for the Size factor.
A is incorrect because alpha is defined here to include performance unexplained by the factors and matches that of the benchmark.
C is incorrect because although the value style does appear to be out of favor as shown by the lower return than that of the market (0.66% versus 0.71%), the Value factor has a positive contribution to the return (0.08%).
I did not understand this question totally, please help me out!
Can you please share full question better understand the context written just before the exhibit which you have shared.
So, this question we have to focus on the exhibit given and specifically on the two columns given as Benchmark and MFC Value fund.
Now, we know that Value means …if coefficient positive value style and if negative growth style. Similarly, size mein positive hua toh small cap and negative hua toh large cap (Remember, SMB ..small minus big).
Coming back to the 3 statements,