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LOS b: Discuss the trade-offs involved in constructing international indexes, including (1) breadth versus investability, (2) liquidity and crossing opportunities versus index reconstitution effects, (3) precise float adjustment versus transactions costs from rebalancing, and (4) objectivity and transparency versus judgment.
Q1. ANZ Asia equity index is a new entry into Asian market indices. The index has better coverage especially in the South Asian markets as compared to its more popular rivals. The index has coverage of 90% of all stocks listed in the constituent markets. Which of the following statements best describes the index?
A) Breadth is high, liquidity is low, and crossing opportunities are high.
B) Breadth is high, liquidity is high, and crossing opportunities are low.
C) Breadth is high, liquidity is low, and crossing opportunities are low.
Q2. Transaction costs in general are higher for:
A) precise float adjustment and more popular indices.
B) precise float adjustment and less popular indices.
C) float adjustment bands and less popular indices.
Q3. The effect of index reconstitution is more severe for:
A) less popular indices because of lower price pressure.
B) more popular indices because of higher price pressure.
C) less popular indices because of higher price pressure.
Q4. Portfolio managers tracking international equity indices have a tradeoff between breadth and investability because:
A) lower breadth results in higher investability and higher transaction costs.
B) higher breadth results in lower investability and higher transaction costs.
C) higher breadth results in higher investability and lower transaction costs. | 
发表于 2009-3-10 17:50
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