Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 14

EVALUATING THE RISK LEVELS OF TOP MUTUAL FUNDS The Security Market Line tells us that assets and portfolios that deliver high average expected rates of return should also have high levels of risk as measured by beta. Let us see if this appears to hold true for mutual fund portfolios. Go to the Mutual Fund Center at Yahoo Finance at http://finance.yahoo.com/funds , click on Top Performers, and then click on Overall Top Performers. This will give you lists of funds with the 10 best rates of return over various time periods. Click on each of the 10 funds listed under "Top Performers-1 Year" and find each fund's beta listed in the section called Performance and Risk. Do any of the funds have a beta less than 1.0 Do these results make sense given what you have learned Should you be impressed that funds with risky portfolios generate high returns