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LOS a: Justify the need for a theory of active portfolio management.
Q1. Gemini Investment Management Company (GIMC) assumes markets will remain at equilibrium indefinitely. GIMC defines security analysis as the examination of factors affecting the value of individual securities. GIMC defines asset allocation as the examination of factors affecting the optimal allocation of assets to the market portfolio and to the risk-free asset. Given GIMC’s assumption that markets are at equilibrium indefinitely, indicate whether GIMC should place significant or insignificant emphasis on security selection and asset allocation.
A) Insignificant emphasis on security selection only.
B) Insignificant emphasis on asset allocation only.
C) Insignificant emphasis on both.
Q2. When markets are at equilibrium, all asset:
A) betas will equal zero.
B) alphas will equal zero.
C) alphas will be positive.
Q3. Intelligent Investors Inc. (III) manages $10 billion in assets using active portfolio management. III believes that security prices often stray from their equilibrium values. Elizabeth Adams and Rajendra Rao work as analysts at III. Adams states that III should overweight all positive alpha stocks. An overweight is defined as an allocation in excess of the asset’s relative market value weight. Rao states that III should allocate assets to maximize the portfolio Sharpe ratio.
Regarding these statements:
A) only Adams is correct.
B) only Rao is correct.
C) both are correct. | 
发表于 2009-4-2 14:10
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