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LOS p, (Part 1): Contrast derivatives-based versus stock-based enhanced indexing strategies. ffice ffice" />
Q1. How is risk controlled in a stock-based enhanced indexing strategy?
A) Buying puts on equity indices.
B) Selling equity futures contracts.
C) Through monitoring factor risk and industry exposures.
Correct answer is C)
In a stock-based enhanced indexing strategy, risk is controlled by monitoring factor risk and industry exposures.
Q2. Which of the following concerning investment strategies is least accurate?
A) Stock-based enhanced indexing strategy can produce higher information ratios because investors can apply their knowledge to a large number of securities.
B) In a long-short, market neutral strategy the benchmark should be the risk-free rate.
C) If a manager does not have an opinion about an index stock in stock-based enhanced indexing strategy, they will not hold the stock.
Correct answer is C)
If a manager does not have an opinion about an index stock in a stock-based enhanced indexing strategy, they will hold the stock at the same level as the benchmark. Stock-based enhanced indexing strategies can produce higher information ratios because the investor can systematically apply his knowledge to a large number of securities, each of which would require independent decisions. Because a long-short, market neutral strategy has no systematic risk, its benchmark should be the risk-free rate (the return on T-bills).
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发表于 2009-3-6 18:00
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