Question 1

Which one is not for the passive portfolio managment?

Options

Manager is judged on how well they overperform the target index

Long-term buy-and-hold strategy

Designed to match market performance

Usually tracks an index over time

Question 2

Which one is not correct?

Option

Any security with an estimated return that plots below the SML is overpriced

In equilibrium, all assets and all portfolios of assets should plot on the SML

Any security with an estimated return that plots above the SML is underpriced

A superior investor must derive value estimate for assets that are consistently superior to the consensus market evalulation to earn better rate return than average investor

Question 3

Which is correct about quadratic optimization?

Options

Buys a representative sample of stocks in the benchmark index according to their weights in the index:

This relies on historical correlations, which may change over time, leading to failure to track the index

Reinvestment of dividends is less difficult

All securities in the index are purchased in proportion to weights in the index

Question 4

Which is correct about sampling in passive investment strategy?

Options

All securities in the index are purchased in proportion to weights in the index

This relies on historical correlations, which may change over time, leading to failure to track the index

Buys a representative sample of stocks in the benchmark index according to their weights in

Reinvestment of dividends is less difficult

Question 5

Which is correct about full replication?

Options

Buys a representative sample of stocks in the benchmark index according to their weights in the index to track the index

This relies on historical correlations, which may change over time, leading to failure O Reinvestment of dividends is less difficult

Reinvestment of dividends is less difficult

All securities in the index are purchased in proportion to weights in the index