Q7. Thamen understands that behavioral finance topics are becoming more important when attempting to better understand the relationship between portfolio manager and client. Which of the following behavioral investor traits were exhibited in Swathman's statements 1-4?

A)   Frame dependence and familiarity.

B)   Representativeness and loss aversion.

C)   Regret and anchoring.

Q8. Thamen starts formulating the risk tolerance portion of the investment policy statement. He knows it is important to consider both the willingness and ability to take risk. Which of the following generally has the most impact on an individual’s ability to take risk?

A)   Liquidity requirements and tax considerations.

B)   Portfolio size and time horizon.

C)   Liquidity requirements and portfolio size.

Q9. Regarding the comments by Thamen and Stone about the different dynamic asset allocation strategies:

A)   Stone is correct on Buy and Hold, but incorrect on CPPI; Thamen is correct on both Buy and Hold and CPPI.

B)   Stone is correct on both Buy and Hold and CPPI; Thamen is correct on Buy and Hold and incorrect on CPPI.

C)   Stone is incorrect on both Buy and Hold and CPPI; Thamen is incorrect on Buy and Hold and correct on CPPI.

Q10. Thamen wants to incorporate the information ratio in the portfolio management process. Which of the following statements best describes the information ratio?

A)   The information ratio uses tracking error in the numerator of the equation which represents the standard deviation of monthly alphas.

B)   The information ratio shows the relationship between the manager's alpha and the standard deviation of alpha.

C)   The lower the information ratio, the more likely it is that a manager's performance is the result of skill rather than luck.

Q11. Thamen has been reading about the benefits of using Monte Carlo approaches in retirement planning. Which of the following is NOT a correct statement with regard to the benefits of using a Monte Carlo approach?

A)   Monte Carlo techniques often better represent trade-offs between short term risks and long-term goals.

B)   Monte Carlo forecasting techniques result in greater reliability than deterministic techniques.

C)   Probabilistic forecasts are often better than point estimates in financial markets.

答案和详解如下：

Q7.Correct answer is C)

Only statements 3 and 4 describe behavior investor traits. Statement 3 is describing regret where the feeling in hindsight is associated with making a bad decision. Statement 4 is describing anchoring which is the inability to fully incorporate the impact of new information on projections.

Q8. Correct answer is B)

The ability to incur risk is determined by the size of an investor’s portfolio relative to his goals, the time horizon, the importance of the investment goals and the amount of volatility the portfolio can sustain without jeopardizing the goals. Other constraints (taxes, liquidity needs, etc.) may impact both the ability and willingness of and individual to take risk but are not generally considered to be as important as time horizon and portfolio size.

Q9. Correct answer is B)

Stone's statement is correct. The Buy and Hold strategy outperforms a Constant Mix strategy in a trending market and outperforms the CPPI strategy in a flat but oscillating market. Thamen was right about Buy and Hold but wrong on CPPI.

The Constant Mix strategy outperforms a comparable Buy and Hold strategy, which, in turn, outperforms a CPPI strategy in a flat but oscillating market.

The CPPI strategy outperforms a comparable Buy and Hold strategy, which, in turn, outperforms a Constant Mix strategy in trending markets.

Q10.Correct answer is B)

The information ratio is used to determine if a manager's alpha is a result of mere chance, or the manager's skill. It shows the relationship between the manager's alpha and the standard deviation of alpha (tracking error): information ratio = alpha / tracking error

Q11. Correct answer is B)

The results of Monte Carlo techniques are only as good as the inputs used. A weakness of Monte Carlo simulations is the need to pre-specify the distribution of the variables used or rely on historical distributions.

Thank you!