Financial Risk Manager Part 2
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A portfolio manager at a pension fund is presenting on investment strategies during a training for newly-hired portfolio analysts. The manager discusses low volatility strategies, illustrates historical performance measures of firms that apply these strategies, and draws attention to the benchmarks used. Which of the following statements about low volatility strategies would be correct for the manager to make during the presentation?
A
The strategies tend to have significant alphas relative to standard market capitalization benchmarks.
B
The strategies tend to have negative alphas relative to dynamic factors such as value or momentum.
C
The strategies tend to generate high alphas over the risk-free rate but negligible alphas over any other benchmark.
D
The strategies tend to generate low alphas if the benchmark used is adjusted for risk and high alphas otherwise.