The major requirements of a portfolio manager include the following, except
Follow the client's policy statement.
Completely diversify the portfolio to eliminate all unsystematic risk.
The ability to derive above-average risk adjusted returns.
Completely diversify the portfolio to eliminate all systematic risk.
None of the above (that is, all are requirements of a portfolio manager) - answer✔Completely
diversify the portfolio to eliminate all systematic risk.
Portfolio managers who anticipate an increase in interest rates should
Act to keep the duration constant.
Decrease the portfolio duration.
Increase the portfolio duration.
Assume higher risk in the market.
Invest in junk bonds. - answer✔Decrease the portfolio duration.
Treynor showed that rational, risk averse investors always prefer portfolio possibility lines that
have
Highly positive slopes. - answer✔Highly positive slopes.
The measure of performance which divides the portfolio's risk premium by the portfolio's beta is
the
Sharpe measure.
Jensen measure.
Fama measure.
Alternative components model (MCV).
Treynor measure. - answer✔Treynor measure.
Sharpe's performance measure divides the portfolio's risk premium by the
Standard deviation of the rate of return.
Variance of the rate of return.
Slope of the fund's characteristic line.
Beta.
Risk free rate. - answer✔Standard deviation of the rate of return.
Which measure of portfolio performance allows analysts to determine the statistical significance
of abnormal returns?
Sharpe measure
Jensen measure
Fama measure
Alternative components model (MCV)
Treynor measure - answer✔Jensen measure
Selectivity measures how well a portfolio performed relative to a
Market portfolio (S&P 400).
Portfolio of the same securities in the previous period.
Naively selected portfolio of equal risk.
Naively selected portfolio of equal return.
World market portfolio. - answer✔Naively selected portfolio of equal risk.
A portfolio performance measurement technique that decomposes the return of a manager's
holdings to a predetermined benchmark's
returns and separates the difference into an allocation and selection is called
Duration matching attrition. - answer✔Performance attribution analysis.
Under the performance attribution analysis method, the ____ measures the manager's decision to
over- or underweight a particular
market segment in terms of that segment's return performance relative to the overall return to the
benchmark.
Selection effect
Allocation effect
Distribution effect
Diversification effect
Attribution effect - answer✔Allocation effect
Under the performance attribution analysis method, the ____ measures the manager's ability to
form specific market segment portfolios
that generate superior returns relative to the way in which the comparable market segment is
defined in the benchmark portfolio weighted by the
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