Hedge fund Strategies

[rahul.goyl]

Hi David,

Cud you plz explain each choice & their justification.

Which of the following is true about HF?

I.Funds with high degree of leverage and funds invested in exchange traded securities endured greater liquidity costs.
II.Statistical arbitrage fund engage in short term mean reversion strategies using a large amount of securities.
III. Leveraged funds trading at Over the counter exchanges have higher liquidity costs.
IV.Long /short strategies have high liquidity costs.
Choose one answer.

a. I, II and IV

b. III and IV

c. I and III

d. I and II

Regards,
Rahul

 

[hsuwang]

I think III has got to be correct, since OTC market has less liquidity, and statistical arbitrage strategy (ie. buy coke and pepsi stocks) are usually short-termed strategy that uses large amounts of securities and believes prices will eventually mean-revert (or converge) and profit from that. But obviously there's not an option for both II, and III to be correct... so I wonder... sorry wasn't of much help..