Question

Consider the annual returns produced by two different active equity portfolio managers (A and B) as well as those of the stock index with which they are both compared:

a. Did either manager outperform the stock index over the given period, and if so, which manager demonstrated superior performance in terms of returns?
b. What factors or investment strategies contributed to the manager's outperformance, if applicable?
c. Were there any specific years or market conditions in which the managers' strategies excelled or underperformed, leading to the observed differences in returns?
Analyzing these questions can provide insights into the relative performance and strategies of active equity portfolio managers in comparison to a benchmark stock index.

Answer 1

To determine if a portfolio manager outperformed a stock index, compare their average annual returns. Factors contributing to outperformance can include active portfolio management and well-informed investment decisions. Specific years or market conditions where performance varied can be analyzed by looking at annual returns.

Step-by-step explanation:

When comparing the performance of two equity portfolio managers (A and B) with a stock index, it is necessary to analyze their annual returns and determine if either manager outperformed the stock index. To do this, calculate the average annual returns of each manager and compare them to the average annual return of the stock index. If the manager's average return is higher than that of the stock index, then they have outperformed.

Factors or investment strategies contributing to a manager's outperformance can include active portfolio management, stock selection, risk management, sector rotation, and market timing. The manager's ability to make well-informed investment decisions and navigate market conditions can lead to superior performance.

Specific years or market conditions where the managers' strategies excelled or underperformed can be identified by analyzing their annual returns. For example, if a manager consistently outperforms during bull markets but underperforms during bear markets, it suggests a strategy that is sensitive to market cycles.