What Strategy Might a Hedge Fund Use to Take Advantage

question 24

Multiple Choice

What strategy might a hedge fund use to take advantage of positive alpha in a long equity position?

• A) short sell the security with positive alpha
• B) leverage and use the proceeds to go long in the alpha security
• C) create a neutral position and gain from the alpha value increase
• D) reduce reliance on margin

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Definitions:

Self-efficacy

The belief in one's abilities to organize and execute the courses of action required to manage prospective situations.

Reciprocal Determinism

Bandura’s explanation of how the factors of environment, personal characteristics, and behavior can interact to determine future behavior.

Locus of Control

The tendency for people to assume that they either have control or do not have control over events and consequences in their lives.

Reciprocal Determinism

A concept in psychology, proposed by Albert Bandura, that human behavior is influenced by personal factors, the environment, and behavior itself, all of which influence each other reciprocally.