Case Detail

Case Summary

Closing Time

Case Number: 5-217-258, Year Published: 2017

HBS Number: KE1020

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Authors: Karl Schmedders; Jan Hilario; Maik Meusel; Walt Pohl

Key Concepts

Data Analysis, Decision Making, Financial Instruments, Financial Management, Financial Planning, Investment Management, Statistical Methods

Abstract

Jennifer McDougall is considering investing in mutual funds for the first time, and has narrowed her options down to three: one that is domiciled in Germany, and two that are domiciled in Luxembourg. As a cautious and risk-averse investor, Jennifer has done extensive research on the three funds, and has come across a curious fact: the beta of the German fund is surprisingly low. After speaking to her financial planner, she learns there is no legal requirement in Germany for mutual funds to compute net asset values at a particular time of the day. If the German fund is closing its books in the middle of the day and its net asset values reflect its midday holdings, rather than end-of-day holdings, this could explain the low beta. Thus, the German fund might appear less risky, without actually being so. Jennifer needed to get a clearer picture of what was going on before making her decision.

Using the data provided with the case, students will determine the closing time of the three funds and how that affects the beta of each. Then they must make a recommendation about which fund would be the best investment for Jennifer.

Learning Objectives

After reading and analyzing the case, students will be able to perform the CAPM regression; compute mutual funds’ betas; compare the market risk across different mutual funds; and articulate the implications of a timing mismatch between fund and index data.

Number of Pages: 6

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: Global

Industry: Mutual funds

Decision Maker Gender: Female

Year of Case: 2017