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LOS m, (Part 1): Explain the sources of active risk, and define and interpret tracking error, tracking risk, and the information ratio.
Q1. A portfolio with a factor sensitivity of one to a particular factor in a multi-factor model and zero to all other factors is called a(n):
A) factor portfolio.
B) tracking portfolio.
C) arbitrage portfolio.
Q2. A portfolio manager uses a two-factor model to manage her portfolio. The two factors are confidence risk and time-horizon risk. If she wants to bet on an unexpected increase in the confidence risk factor (which has a positive risk premium), but hedge away her exposure to time-horizon risk (which has a negative risk premium), she should create a portfolio with a sensitivity of:
A) 1.0 to the confidence risk factor and -1.0 to the time-horizon factor.
B) ?1.0 to the confidence risk factor and 1.0 to the time-horizon factor.
C) 1.0 to the confidence risk factor and 0.0 to the time-horizon factor.
Q3. Janice Barefoot, CFA, has been managing a portfolio for a client who has asked Barefoot to use the Dow Jones Industrial Average (DJIA) as a benchmark. In her second year, Barefoot used 29 of the 30 DJIA stocks. She selected a non-DJIA stock in the same industry as the omitted DJIA stock to replace that stock. Compared to the DJIA, Barefoot placed a lower weight on the communication stocks and a higher weight on the other stocks still in the portfolio. Over that year, the non-DJIA stock in the portfolio had a positive and higher return than the omitted DJIA stock. The communication stocks had a negative return while all of the other stocks had a positive return. The portfolio managed by Barefoot outperformed the DJIA. Based on this we can say that the return from factor tilts and asset selection were:
A) negative and positive respectively.
B) positive and negative respectively.
C) both positive.
Q4. A common strategy in bond portfolio management is enhanced indexing by matching primary risk factors. This strategy could be implemented by forming:
A) a portfolio with factor sensitivities that sum to one.
B) a portfolio with asset portfolio weights equal to that of the index.
C) a portfolio with factor sensitivities equal to that of the index.
Q5. A portfolio with a specific set of factor sensitivities designed to replicate the factor exposures of a benchmark index is called a:
A) factor portfolio.
B) arbitrage portfolio.
C) tracking portfolio.
Q6. Janice Barefoot, CFA, has been managing a portfolio for a client who has asked Barefoot to use the Dow Jones Industrial Average (DJIA) as a benchmark. In her first year Barefoot managed the portfolio by choosing 29 of the 30 DJIA stocks. She selected a non-DJIA stock in the same industry as the omitted stock to replace that stock. Compared to the DJIA, Barefoot has placed a higher weight on the financial stocks and a lower weight on the other stocks still in the portfolio. Over that year, the non-DJIA stock in the portfolio had a negative return while the omitted DJIA stock had a positive return. The portfolio managed by Barefoot outperformed the DJIA. Based on this we can say that the return from factor tilts and asset selection were:
A) negative and positive respectively.
B) both positive.
C) positive and negative respectively.
Q7. Janice Barefoot, CFA, has managed a portfolio where she used the Dow Jones Industrial Average (DJIA) as a benchmark. In the past two years the average monthly return on her portfolio has been higher than that of the DJIA. To get a measure of active return per unit of active risk Barefoot should compute the:
A) information ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided by the average of those differences.
B) Sharpe ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided into the average of those differences.
C) information ratio, which is the standard deviation of the differences between the portfolio and benchmark returns divided into the average of those differences.
Q8. A tracking portfolio is a portfolio with:
A) factor sensitivities of zero to all factors, positive expected net cash flow, and an initial investment of zero.
B) a specific set of factor sensitivities designed to replicate the factor exposures of a benchmark index.
C) a factor sensitivity of one to a particular factor in a multi-factor model and zero to all other factors.
Q9. A factor portfolio is a portfolio with:
A) a specific set of factor sensitivities designed to replicate the factor exposures of a benchmark index.
B) a factor sensitivity of one to a particular factor in a multi-factor model and zero to all other factors.
C) factor sensitivities of zero to all factors, positive expected net cash flow, and an initial investment of zero. | 
发表于 2009-4-2 13:22
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