Mock Exam: Growth vs Value amount, whether, compare, question

yuoska

Just when I thought growth vs value questions would be easy point. How are they determining the answer to question #21.

Are you supposed to look at Fund GB1 on it's own and know whether the amount of the P/E would make it value or growth? Or are you supposed to compare it relatively to say the SGX or STI?

I fear there is not an answer out there.

bboo

OK I just took the mock...

When you're determining whether a portfolio is growth/value/market-oriented, you need to compare it to the relevant benchmark. In this case, the paragraph stated that the two mutual funds were made up of stocks that are a part of the STI index, so it's a much more relevant comparison than the SGX, which would contain a lot of midcap and smallcap stocks.

PalacioHill

little question caused too much loss hair...

I think SGX is the best proxy for "market" and any "market orientation" should be against the "market" portfolio. The STI on the other hand is a much narrower index of just 30 *largest* firms from SGX!! STI by definition is a *large cap* index.

mcmc

When it is compared to the overall broad market index, it looks like a Value style. However, when compared to the index of the large market cap index (which itself is a broad market based index, just with a focus on the largest market cap stocks), it is extremely similar in all respects to that index. Because of this, the most precise style of this index would be a "large market cap, market oriented" style. So, the answer is market oriented. Fairly straight forward question.

Colum

BUMP.

The general consensus is to compare fund GB1 to the SGX index. However one of the answers descriptions says the funds leans slightly towards a growth style because of it's dividend yield.

GB1 dividend yield 1.5% and the index is .8%. Wouldn't having a higher dividend yield make it more valuey?

Just about to let this question go and move on with my life.

mar350

The answer given was that the valuation ratios ( P/E , P/B) are very similar to the index which is obviously a market index. Since there is no value tilt or growth tilt , it resembles a market-oriented style more than anything else.


I got this one right but for the wrong reason. I didn't even look at the valuation ratios for the index, I was in such a hurry , I just scanned left to right and decided it didn't look valuey or growthy so must be market - oriented.

Valores

21 is clearly C ............in order to determine investment style you have to compare with index

Unforseen

Compare to index. Value weighted index is another name for capitalization weighted index not the style unfortunately.



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 10:58AM by Paraguay.

IAmNeil

although after re-reading the question, it says that the STI index is a value weighted index, so compared to that it looks more like a value than a growth style.......

i know i am not answering your question but i can see why there is so much confusion regarding this

NakedPuts00

i got this question wrong and dont have it in front of me, but I remember thinking that since it showed similarities to the index with the top 30 funds it should be value since only value companies would be in the top 30. i dont know what I was thinking. I think the bottom line was that a few of the PE ratios and dividend yield gave conflicting views.

you are supposed to make a relative comparison to the index. lower PEs are value higher growth is growth. this one had both so market oriented. sorry thats best I can do without it in front. at least you get a bump a lump