NO.PZ2019092801000002
问题如下：
Jane Shaindy is the chief investment officer of a large pension fund. The pension fund is based in the United States and currently has minimal exposure to hedge funds. The pension fund’s board has recently approved an additional investment in a long/short equity strategy. As part of Shaindy’s due diligence on a hedge fund that implements a long/short equity strategy, she uses a conditional linear factor model to uncover and analyze the hedge fund’s risk exposures. She is interested in analyzing several risk factors, but she is specifically concerned about whether the hedge fund’s long (positive) exposure to equities increases during turbulent market periods.
1. Describe how the conditional linear factor model can be used to address Shaindy’s concern.
During a monthly board meeting, Shaindy discusses her updated market forecast for equity markets. Due to a recent large increase in interest rates and geopolitical tensions, her forecast has changed from one of modestly rising equities to several periods of non-trending markets. Given this new market view, Shaindy concludes that a long/short strategy will not be optimal at this time and seeks another equity-related strategy. The Fund has the capacity to use a substantial amount of leverage.
2. Determine the most appropriate equity-related hedge fund strategy that Shaindy should employ. Justify your response.
选项：
解释：
1. A linear factor model can provide insights into the intrinsic characteristics and risks in a hedge fund investment. Since hedge fund strategies are dynamic, a conditional model allows for the analysis in a specific market environment to determine whether hedge fund strategies are exposed to certain risks under abnormal market conditions. A conditional model can show whether hedge fund risk exposures to equities that are insignificant during calm periods become significant during turbulent market periods. During normal periods when equities are rising, the desired exposure to equities (S&P 500 Index) should be long (positive) to benefit from higher expected returns. However, during crisis periods when equities are falling sharply, the desired exposure to equities should be short (negative).
A linear factor model 可以提供对冲基金投资的特征和风险的见解。——由于对冲基金策略是动态的，因此条件模型允许在特定的市场环境中进行分析，以确定对冲基金策略在异常市场条件下是否承受某些风险。
条件模型显示了在平静的市场时期中微不足道的对冲基金风险敞口（例如信贷或波动性）在动荡的市场时期中是否可能变得重要。——在股票上涨的正常时期，期望的股票投资（标准普尔500指数）应该较多（为正数），以便从更高的预期收益中受益。 但是，在股市急剧下跌的危机时期，所需的股票敞口应该是较少（负数）。
扩折号前的内容是答案核心。后面为解释说明，能看懂就行。也就是这两句内容
A linear factor model can provide insights into the intrinsic characteristics and risks in a hedge fund investment.
A conditional model can show whether hedge fund risk exposures to equities that are insignificant during calm periods become significant during turbulent market periods.
这个在咱们教材中也有
2. Shaindy should employ an equity market-neutral (EMN) equity strategy. Overall, EMN managers are more useful for portfolio allocation during periods of non-trending or declining markets. EMN hedge fund strategies take opposite (long and short) positions in similar or related equities having divergent valuations while attempting to maintain a near net zero portfolio exposure to the market. EMN managers neutralize market risk by constructing their portfolios such that the expected portfolio beta is approximately equal to zero. Moreover, EMN managers often choose to set the betas for sectors or industries as well as for common risk factors (e.g., market size, price-to-earnings ratio, and book-to-market ratio) equal to zero. Since these portfolios do not take beta risk and attempt to neutralize many other factor risks, they typically must apply leverage to the long and short positions to achieve a meaningful return profile from their individual stock selections.
EMN strategies typically deliver return profiles that are steadier and less volatile than those of many other hedge strategy areas. Over time, their conservative and constrained approach typically results in a less dynamic overall return profile than those of managers who accept beta exposure. Despite the use of substantial leverage and because of their more standard and overall steady risk/return profiles, equity market-neutral managers are often a preferred replacement for fixed-income managers during periods when fixed-income returns are unattractively low.
简单归纳一下，题干的核心是基金经理认为市场将从适度上涨变为无趋势（non-trending），问这种预期下要把L/S策略改成哪种equity策略更好。
集体的核心思路是对于non-trending的市场，maerket neutral策略最合适。
答案其余部分长篇大论的都是在分析了market-nuetral策略的特点和应用，上课都讲过。
ps：long/short strategy并不是beta要等于0的，可以用net long 或者 net short, 一般net long的情况会比较多，因为股票市场长期是上涨的。
而Equity market neutral就是要求一定是beta=0。两者只是在这里有区别，策略的本质思路是一样的。
我的答案如下，麻烦老师批改，谢谢！！！
1. Describe how the conditional linear factor model can be used to address Shaindy’s concern.
The conditional linear factor model uses dummy variables to distinguish whether the market is normal or in stress. She is specifically concerned about whether the hedge fund’s long (positive) exposure to equities increases during turbulent market periods , therefore she can adjust the dummy variable to see the difference.
2. Determine the most appropriate equity-related hedge fund strategy that Shaindy should employ. Justify your response.
Equity market neutral is suitable. Since the recent large increase in interest rates and geopolitical tensions, and her forecast has changed from one of modestly rising equities to several periods of non-trending markets, the market beta will have more volatility. Equity market neutral has a beta of zero and can avoid market risk.
