Reading 47: Evaluating Portfolio Performance Los m~Q1-6 allocation, following, factor, least

youzizhang

 

LOS m: Discuss the use of fundamental factor models in micro performance attribution.

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.

 

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.

 

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.

 

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.

 

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.

 

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.

rawrdinosaur

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luqian55

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deqiang

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aleckkwong

C)   Allocation/selection attribution can lead to spurious correlations.

A)   The amount of leverage used in the fund.

A)   The results will look very similar to a returns-based style analysis.

A)   Identify the fundamental factors that determine unsystematic returns.

B)   Exposures to the factors need to be determined at the start of an evaluation period.

B)   The strength of fundamental factor analysis is its simplicity and the reliability of the correlations it produces.

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