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Q1. Which of the following least accurately characterizes fundamental factor model attribution and allocation/selection attribution?
A) Allocation/selection attribution is relatively easy to calculate.
B) Security weights need to be determined at the start of the evaluation period in allocation/selection attribution.
C) Allocation/selection attribution can lead to spurious correlations.
Correct answer is C)
It is actually fundamental factor model attribution that can lead to spurious correlations because the analysis is quite complex.
Q2. Which of the following would be least likely to be used in both returns based style analysis and fundamental factor model micro attribution?
A) The amount of leverage used in the fund.
B) The sensitivities of the portfolio to index returns.
C) The returns to a small-cap stock index.
Correct answer is A)
Both returns based style analysis and fundamental factor model micro attribution would utilize the returns to various indices as well as the sensitivities to the indices. However, returns based style analysis would not examine fundamental factors such as the leverage in the fund and the size of the stocks in the fund.
Q3. Which of the following statements regarding fundamental factor model micro attribution is FALSE?
A) The results will look very similar to a returns-based style analysis.
B) The results will indicate the source of portfolio returns, based upon benchmark factor exposures versus the manager’s normal factor exposures.
C) It will be necessary to identify the fundamental factors that will generate systematic returns.
Correct answer is B)
The results will indicate the source of portfolio returns, based upon actual factor exposures (not benchmark) versus the manager’s normal factor exposures. Both of the other statements are true in the context of fundamental factor model micro attribution
Q4. Which of the following steps in the constructions of a suitable fundamental factor micro attribution is FALSE?
A) Identify the fundamental factors that determine unsystematic returns.
B) Determine the performance of each of the factors.
C) Specify a benchmark.
Correct answer is A)
It is necessary to determine the fundamental factors that determine the systematic (no unsystematic) returns. Both of the other statements are correct.
Q5. Which of the following is NOT a recognized weakness of allocation/selection attribution?
A) Security selection decisions have a knock on effect on sector weighting decisions.
B) Exposures to the factors need to be determined at the start of an evaluation period.
C) Can be confusing as it reflects the joint effect of allocating weights to both securities and sectors.
Correct answer is B)
Exposure to the factors need to be determined at the start of an evaluation period is a weakness of fundamental factor model attribution.
Q6. Which of the following statements relating to allocation/selection attribution and fundamental factor model attribution is FALSE?
A) The strength of allocation/selection attribution is that it disaggregates performance effects of manager’s decisions between sectors and securities.
B) The strength of fundamental factor analysis is its simplicity and the reliability of the correlations it produces.
C) The strength of allocation/selection attribution is that it is relatively easy to calculate.
Correct answer is B)
A key weakness of fundamental factor model attribution is that it can prove to be complex leading toe the potential for spurious correlations.
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发表于 2009-4-10 14:28
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