Question 1

A Long futures positions in the S&P500 has the effect of ____ portfolio exposure to equities, while short futures positions in the S&P500 has the effect of ____ portfolio exposure to equities.

Accepted Answer

A)   Increasing, decreasing.
B)   Decreasing, increasing,
C)   Increasing, increasing.
D)   Decreasing, decreasing.
E)   None of the above.

Question 2

The goal of a passive portfolio is to track the index as closely as possible.

Accepted Answer

A) True 
 B)False

Question 3

Sharpe (1991) study reveals that active managers typically outperform passive managers even after transaction costs and fees.

Accepted Answer

A) True 
 B)False

Question 4

The asset allocation strategy that separately examines capital market conditions and the investor's objectives and constraints is called

Accepted Answer

A)   Integrated asset allocation.
B)   Tactical asset allocation.
C)   Sector rotation.
D)   Strategic asset allocation.
E)   Insured asset allocation.

Question 5

Style investing involves constructing portfolios in such a way to capture one or more of the characteristics of equity securities.

Accepted Answer

A) True 
 B)False

Question 6

In ____ asset allocation, the investor's risk tolerance and constraints are assumed to be constant over time. However, changes in capital market conditions result in changes in the portfolio's stock-bond mix.

Accepted Answer

A)   Integrated
B)   Strategic
C)   Tactical
D)   Insured
E)   None of the above.

Question 7

A contrarian investment strategy is based on the belief that

Accepted Answer

A)   Stock returns are mean reverting.
B)   The best time to buy is when other investors are bullish.
C)   Rising stocks will continue to rise.
D)   Passive management is preferred to active management.
E)   A long/short portfolio will outperform a long only portfolio. A

Question 8

Growth oriented investors focus on the price component of the Price/Earnings ratio.

Accepted Answer

A) True 
 B)False

Question 9

In equity portfolio management, tracking error occurs when

Accepted Answer

A)   The managed portfolio outperforms the benchmark portfolio.
B)   The managed portfolio under performs the benchmark portfolio.
C)   The return volatility of the managed portfolio is positively correlated with the return volatility of the benchmark portfolio.
D)   The return volatility of the managed portfolio is negatively correlated with the return volatility of the benchmark portfolio.
E)   The return volatility of the managed portfolio is not correlated with the return volatility of the benchmark portfolio.

Question 10

An investor focusing on a growth strategy does all of the following except:

Accepted Answer

A)   Focuses on the earnings per share (EPS)  component on the P/E ratio
B)   Seek out investments with higher expected growth in earnings.
C)   Implicitly assume that the P/E ratio will grow over the near term.
D)   Focuses on the current and future economic "story" of a company.
E)   All of the above statements are true. C

Question 11

An advantage of quadratic programming is that it relies on historical correlations.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is false?

Accepted Answer

A)   A manager's choice to align with an investment style communicates information to clients about the investor's focus, area of expertise, and stock evaluation methods.
B)   An investment manager's style cannot be used as a basis for measuring the manager's performance relative to a benchmark.
C)   Style identification allows an investor to select investment managers that allow his overall portfolio to be properly diversified.
D)   Style investing allows control of the total portfolio to be shared between the investment managers and a knowledgeable sponsor.
E)   None of the above (all are true statements)

Question 13

Which of the following is not considered a mainstream investment style?

Accepted Answer

A)   Value
B)   Growth
C)   Market-oriented
D)   Benchmark
E)   Small-cap

Question 14

A fundamental tenet of the contrarian investment strategy is the notion that

Accepted Answer

A)   All stock returns are mean reverting.
B)   Certain stocks outperform others during different stages of the business cycle.
C)   Value stock investing is superior to growth stock investing.
D)   Growth stock investing is superior to value stock investing.
E)   None of the above.

Question 15

Which of the following is considered a strategy for timing the market and adding value to actively managed portfolios?

Accepted Answer

A)   Time the markets by shifting between different types of securities based on market forecasts and estimated risk premiums.
B)   Shift funds between the various equity sectors, industries, investment styles, etc., in order to take advantage of the "hot" concept before the remainder of the market does.
C)   Individual stockpicking in order to buy low and sell high.
D)   Choices a and b only
E)   All of the above

Question 16

It does not make economic sense for portfolio managers to try to "time" between different investment styles.

Accepted Answer

A) True 
 B)False  False

Question 17

Which of the following statements concerning active equity portfolio management strategies is true?

Accepted Answer

A)   The goal of active equity portfolio management is to earn a portfolio return that exceeds the return of a passive benchmark portfolio (net of transaction costs)  on a risk-adjusted basis.
B)   An actively managed equity portfolio has lower total transaction costs.
C)   An actively managed equity portfolio has lower risk than the passive benchmark.
D)   A key to success for an actively managed equity portfolio is to maximize trading activity.
E)   All of the above.

Question 18

Exhibit 15-1
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) 
A portfolio manager is trying to establish a strategic asset allocation for two different clients, Bob Bowman and Tom Luck. Bob Bowman has a risk tolerance factor of 22 and Tom Luck has a risk tolerance factor of 6. The characteristics of the three model portfolios under consideration are provided in the table below.   Asset Mix ‾ Partfalia  Stack  Bond  Exgected  Retun  Variance  A 0.750.250.120.45 B 0.40.60.080.16 C 0.30.70.050.06\begin{array}{c}\underline {	ext { Asset Mix }}\quad\quad\quad\quad\quad\quad\\begin{array} { c c c c c } 	ext { Partfalia } & 	ext { Stack } & 	ext { Bond } & \begin{array} { c } 	ext { Exgected } \	ext { Retun }\end{array} & 	ext { Variance } \\hline 	ext { A } & 0.75 & 0.25 & 0.12 & 0.45 \	ext { B } & 0.4 & 0.6 & 0.08 & 0.16 \	ext { C } & 0.3 & 0.7 & 0.05 & 0.06\end{array}\end{array} Asset Mix ​ Partfalia  A  B  C ​ Stack 0.750.40.3​ Bond 0.250.60.7​ Exgected  Retun ​0.120.080.05​ Variance 0.450.160.06​​​ 
-Refer to Exhibit 15-1. The expected utilities of Portfolios A, B and C for Tom Luck are

Accepted Answer

A)   Portfolio A = 9.95, Portfolio B = 7.27, Portfolio C = 4.73
B)   Portfolio A = 4.5, Portfolio B = 5.33, Portfolio C = 4.0
C)   Portfolio A = 7.95, Portfolio B = 5.33, Portfolio C = 4.73
D)   Portfolio A = 3.5, Portfolio B = 7.27, Portfolio C = 4.73
E)   Portfolio A = 5.33, Portfolio B = 7.27, Portfolio C = 6.75

Question 19

Which of the following is not a technique for constructing a passive index portfolio?

Accepted Answer

A)   Full replication
B)   Sampling
C)   Quadratic programming
D)   Linear programming
E)   None of the above (that is, all are techniques for constructing a passive index portfolio)

Question 20

Which of the following is not considered an active management strategy?

Accepted Answer

A)   Sector rotation
B)   Use of factor models
C)   Quantitative screens
D)   Full replication
E)   Linear programming

Exam 15: Equity Portfolio Management Strategies

A Long futures positions in the S&P500 has the effect of portfolio exposure to equities, while short futures positions in the S&P500 has the effect of portfolio exposure to equities.

Correct Answer
verified

The goal of a passive portfolio is to track the index as closely as possible.

Correct Answer
verified

Sharpe (1991) study reveals that active managers typically outperform passive managers even after transaction costs and fees.

Correct Answer
verified

The asset allocation strategy that separately examines capital market conditions and the investor's objectives and constraints is called

Correct Answer
verified

Style investing involves constructing portfolios in such a way to capture one or more of the characteristics of equity securities.

Correct Answer
verified

In ____ asset allocation, the investor's risk tolerance and constraints are assumed to be constant over time. However, changes in capital market conditions result in changes in the portfolio's stock-bond mix.

Correct Answer
verified

A contrarian investment strategy is based on the belief that

Correct Answer
verified
A

Growth oriented investors focus on the price component of the Price/Earnings ratio.

Correct Answer
verified

In equity portfolio management, tracking error occurs when

Correct Answer
verified

An investor focusing on a growth strategy does all of the following except:

Correct Answer
verified
C

An advantage of quadratic programming is that it relies on historical correlations.

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

Which of the following is not considered a mainstream investment style?

Correct Answer
verified

A fundamental tenet of the contrarian investment strategy is the notion that

Correct Answer
verified

Which of the following is considered a strategy for timing the market and adding value to actively managed portfolios?

Correct Answer
verified

It does not make economic sense for portfolio managers to try to "time" between different investment styles.

Correct Answer
verified
False

Which of the following statements concerning active equity portfolio management strategies is true?

Correct Answer
verified

Correct Answer
verified

Which of the following is not a technique for constructing a passive index portfolio?

Correct Answer
verified

Which of the following is not considered an active management strategy?

Correct Answer
verified

Exam 15: Equity Portfolio Management Strategies

A Long futures positions in the S&P500 has the effect of ____ portfolio exposure to equities, while short futures positions in the S&P500 has the effect of ____ portfolio exposure to equities.

Correct AnswerverifiedShow Answer

The goal of a passive portfolio is to track the index as closely as possible.

Correct AnswerverifiedShow Answer

Sharpe (1991) study reveals that active managers typically outperform passive managers even after transaction costs and fees.

Correct AnswerverifiedShow Answer

The asset allocation strategy that separately examines capital market conditions and the investor's objectives and constraints is called

Correct AnswerverifiedShow Answer

Style investing involves constructing portfolios in such a way to capture one or more of the characteristics of equity securities.

Correct AnswerverifiedShow Answer

In ____ asset allocation, the investor's risk tolerance and constraints are assumed to be constant over time. However, changes in capital market conditions result in changes in the portfolio's stock-bond mix.

Correct AnswerverifiedShow Answer

A contrarian investment strategy is based on the belief that

Correct AnswerverifiedA

Growth oriented investors focus on the price component of the Price/Earnings ratio.

Correct AnswerverifiedShow Answer

In equity portfolio management, tracking error occurs when

Correct AnswerverifiedShow Answer

An investor focusing on a growth strategy does all of the following except:

Correct AnswerverifiedC

An advantage of quadratic programming is that it relies on historical correlations.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Which of the following is not considered a mainstream investment style?

Correct AnswerverifiedShow Answer

A fundamental tenet of the contrarian investment strategy is the notion that

Correct AnswerverifiedShow Answer

Which of the following is considered a strategy for timing the market and adding value to actively managed portfolios?

Correct AnswerverifiedShow Answer

It does not make economic sense for portfolio managers to try to "time" between different investment styles.

Correct AnswerverifiedFalse

Which of the following statements concerning active equity portfolio management strategies is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a technique for constructing a passive index portfolio?

Correct AnswerverifiedShow Answer

Which of the following is not considered an active management strategy?

Correct AnswerverifiedShow Answer

A Long futures positions in the S&P500 has the effect of portfolio exposure to equities, while short futures positions in the S&P500 has the effect of portfolio exposure to equities.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified