A Hedge Fund Pursuing a ______ Strategy Is Trying to Exploit

question 42

Multiple Choice

A hedge fund pursuing a ______ strategy is trying to exploit relative mispricing within a market but is hedged to avoid taking a stance on the direction of the broad market.

• A) directional
• B) nondirectional
• C) market neutral
• D) arbitrage or speculation
• E) nondirectional and market neutral

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Definitions:

Generalization Gradient

A concept in psychology and behavioral science describing the decrease in response strength with increasing difference from the original conditioned stimulus.

Discrimination Learning

The process of learning to respond differently to various stimuli, distinguishing between those that are rewarded and those that are not.

Stimulus Generalization

The tendency for the conditioned response to be evoked by stimuli that are similar to the stimulus to which the response was originally conditioned.

Second-order Conditioning

A form of learning where a stimulus that initially had no significance becomes conditioned as a result of being paired with another stimulus that already induces a conditioned response.