Question 1

In performance measurement the bogey portfolio is designed to ________.

Accepted Answer

A) measure the returns to a completely passive strategy 
B) measure the returns to a similar active strategy 
C) measure the returns to a given investment style 
D) equal the return on the S&P500 
A) measure the returns to a completely passive strategy 
B) measure the returns to a similar active strategy 
C) measure the returns to a given investment style 
D) equal the return on the S&P500

Question 2

Which one of the following averaging methods is the preferred method of constructing returns series for use in evaluating portfolio performance?

Accepted Answer

A) Geometric average 
B) Arithmetic average 
C) Dollar-weighted 
D) Internal 
A) Geometric average 
B) Arithmetic average 
C) Dollar-weighted 
D) Internal

Question 3

Active portfolio management consists of ________.
I. market timing
II. security selection
III. sector selection within given markets
IV. indexing

Accepted Answer

A) I and II only 
B) II and III only 
C) I, II and III only 
D) I, II, III and IV 
A) I and II only 
B) II and III only 
C) I, II and III only 
D) I, II, III and IV

Question 4

The critical variable in the determination of the success of the active portfolio is the share's ________.

Accepted Answer

A) alpha/non-systematic risk 
B) alpha/systematic risk 
C) delta/non-systematic risk 
D) delta/systematic risk 
A) alpha/non-systematic risk 
B) alpha/systematic risk 
C) delta/non-systematic risk 
D) delta/systematic risk

Question 5

The average returns, standard deviations and betas for three funds are given below along with data for the S&P 500 index. The risk-free return during the sample period is 6%.   You wish to evaluate the three mutual funds using the Jensen measure for performance evaluation. The fund with the highest Jensen measure of performance is ________.

Accepted Answer

A) Fund A 
B) Fund B 
C) Fund C 
D) S&P500 
A) Fund A 
B) Fund B 
C) Fund C 
D) S&P500

Question 6

The table presents the actual return of each sector of the manager's portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the benchmark or neutral sector allocations in column (3) and the returns of sector indexes in column (4).   What was the manager's return in the month?

Accepted Answer

A) 2.07% 
B) 2.21% 
C) 2.24% 
D) 4.80% 
A) 2.07% 
B) 2.21% 
C) 2.24% 
D) 4.80%

Question 7

Active portfolio managers try to construct a risky portfolio with ________.

Accepted Answer

A) a higher Sharpe measure than a passive strategy 
B) a lower Sharpe measure than a passive strategy 
C) the same Sharpe measure as a passive strategy 
D) very few securities 
A) a higher Sharpe measure than a passive strategy 
B) a lower Sharpe measure than a passive strategy 
C) the same Sharpe measure as a passive strategy 
D) very few securities

Question 8

An attribution analysis will NOT likely contain which of the following components?

Accepted Answer

A) Asset allocation 
B) Index returns 
C) Risk-free returns 
D) Security selection 
A) Asset allocation 
B) Index returns 
C) Risk-free returns 
D) Security selection

Question 9

Your return will generally be higher using the ________ if you time your transactions poorly and your return will generally be higher using the ________ if you time your transactions well.

Accepted Answer

A) dollar-weighted return method; dollar-weighted return method 
B) dollar-weighted return method; time-weighted return method 
C) time-weighted return method; dollar-weighted return method 
D) time-weighted return method; time-weighted return method 
A) dollar-weighted return method; dollar-weighted return method 
B) dollar-weighted return method; time-weighted return method 
C) time-weighted return method; dollar-weighted return method 
D) time-weighted return method; time-weighted return method

Question 10

Empirical tests to date show ________.

Accepted Answer

A) that many investors have earned large rewards by market timing 
B) little evidence of market timing ability 
C) clear cut evidence of substantial market timing ability 
D) evidence that absolutely no market timing ability exists 
A) that many investors have earned large rewards by market timing 
B) little evidence of market timing ability 
C) clear cut evidence of substantial market timing ability 
D) evidence that absolutely no market timing ability exists

Question 11

Morningstar's RAR produce results which are similar but not identical to ________.

Accepted Answer

A) Jensen's alpha 
B) M2 
C) the Treynor ratio 
D) the Sharpe ratio 
A) Jensen's alpha 
B) M2 
C) the Treynor ratio 
D) the Sharpe ratio

Question 12

The contribution of security selection within asset classes to the total excess return was ________.

Accepted Answer

A) 1.5% 
B) 2.0% 
C) 2.5% 
D) 3.5% (.12 - .10.20 + (.1700 - .1500).80 = .0200 
A) 1.5% 
B) 2.0% 
C) 2.5% 
D) 3.5% (.12 - .10.20 + (.1700 - .1500).80 = .0200

Question 13

Consider the Sharpe and Treynor performance measures. When a pension fund is large and well diversified in total and it has many managers, the ________ measure is better for evaluating individual managers while the ________ measure is better for evaluating the manager of a small fund with only one manager responsible for all investments that may not be fully diversified.

Accepted Answer

A) Sharpe; Sharpe 
B) Sharpe; Treynor 
C) Treynor; Sharpe 
D) Treynor; Treynor 
A) Sharpe; Sharpe 
B) Sharpe; Treynor 
C) Treynor; Sharpe 
D) Treynor; Treynor

Question 14

Assume you purchased a rental property for $100 000 and sold it one year later for $115 000 (there was no mortgage on the property). At the time of the sale, you paid $3 000 in commissions and $1 000 in taxes. If you received $10 000 in rental income (all received at the end of the year), what annual rate of return did you earn?

Accepted Answer

A) 6% 
B) 11% 
C) 20% 
D) 25% 
A) 6% 
B) 11% 
C) 20% 
D) 25%

Question 15

Which one of the following is largely based on forecasts of macroeconomic factors?

Accepted Answer

A) Security selection 
B) Passive investing 
C) Market efficiency 
D) Market timing 
A) Security selection 
B) Passive investing 
C) Market efficiency 
D) Market timing

Question 16

What was the manager's over- or under-performance for the month?

Accepted Answer

A) Under-performance = 0.03% 
B) Over-performance = 0.03% 
C) Over-performance = 0.14% 
D) Under-performance = 3% 
A) Under-performance = 0.03% 
B) Over-performance = 0.03% 
C) Over-performance = 0.14% 
D) Under-performance = 3%

Question 17

A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 14% and has a standard deviation of 21%. What is the Sharpe measure of the portfolio if the risk-free rate is 5%?

Accepted Answer

A) .3978 
B) .4158 
C) .4563 
D) .4706 
A) .3978 
B) .4158 
C) .4563 
D) .4706

Question 18

The correct measure of timing ability is ________ for a portfolio manager who correctly forecasts 55% of bull markets and 55% of bear markets.

Accepted Answer

A) -5% 
B) 5% 
C) 10% 
D) 95% 
A) -5% 
B) 5% 
C) 10% 
D) 95%

Question 19

The M2 measure of portfolio performance was developed by ________.

Accepted Answer

A) Modigliani and Treynor 
B) Modigliani and Modigliani 
C) Merton and Miller 
D) Fama and French 
A) Modigliani and Treynor 
B) Modigliani and Modigliani 
C) Merton and Miller 
D) Fama and French

Question 20

The ________ calculates the reward-to-risk trade-off by dividing the average portfolio excess return by the portfolio beta.

Accepted Answer

A) Sharpe measure 
B) Treynor measure 
C) Jensen measure 
D) appraisal ratio 
A) Sharpe measure 
B) Treynor measure 
C) Jensen measure 
D) appraisal ratio

In performance measurement the bogey portfolio is designed to ________.

Which one of the following averaging methods is the preferred method of constructing returns series for use in evaluating portfolio performance?

Active portfolio management consists of ________. I. market timing II. security selection III. sector selection within given markets IV. indexing

The critical variable in the determination of the success of the active portfolio is the share's ________.

Active portfolio managers try to construct a risky portfolio with ________.

An attribution analysis will NOT likely contain which of the following components?

Your return will generally be higher using the if you time your transactions poorly and your return will generally be higher using the if you time your transactions well.

Empirical tests to date show ________.

Morningstar's RAR produce results which are similar but not identical to ________.

The contribution of security selection within asset classes to the total excess return was ________.

Which one of the following is largely based on forecasts of macroeconomic factors?

What was the manager's over- or under-performance for the month?

A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 14% and has a standard deviation of 21%. What is the Sharpe measure of the portfolio if the risk-free rate is 5%?

The correct measure of timing ability is ________ for a portfolio manager who correctly forecasts 55% of bull markets and 55% of bear markets.

The M² measure of portfolio performance was developed by ________.

The ________ calculates the reward-to-risk trade-off by dividing the average portfolio excess return by the portfolio beta.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Managed Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis and Behavioral Finance

Bond Prices and Yields

Managing Bond Portfolios

Equity Valuation

Macroeconomic and Industry Analysis

Financial Statement Analysis

Options and Risk Management

Futures and Risk Management

Investors and the Investment Process

Hedge Funds

Filters

Exam 18: Portfolio Performance Evaluation

In performance measurement the bogey portfolio is designed to ________.

Which one of the following averaging methods is the preferred method of constructing returns series for use in evaluating portfolio performance?

Active portfolio management consists of ________. I. market timing II. security selection III. sector selection within given markets IV. indexing

The critical variable in the determination of the success of the active portfolio is the share's ________.

Active portfolio managers try to construct a risky portfolio with ________.

An attribution analysis will NOT likely contain which of the following components?

Your return will generally be higher using the ________ if you time your transactions poorly and your return will generally be higher using the ________ if you time your transactions well.

Empirical tests to date show ________.

Morningstar's RAR produce results which are similar but not identical to ________.

The contribution of security selection within asset classes to the total excess return was ________.

Which one of the following is largely based on forecasts of macroeconomic factors?

What was the manager's over- or under-performance for the month?

A portfolio generates an annual return of 13%, a beta of 0.7 and a standard deviation of 17%. The market index return is 14% and has a standard deviation of 21%. What is the Sharpe measure of the portfolio if the risk-free rate is 5%?

The correct measure of timing ability is ________ for a portfolio manager who correctly forecasts 55% of bull markets and 55% of bear markets.

The M2 measure of portfolio performance was developed by ________.

The ________ calculates the reward-to-risk trade-off by dividing the average portfolio excess return by the portfolio beta.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Managed Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis and Behavioral Finance

Bond Prices and Yields

Managing Bond Portfolios

Equity Valuation

Macroeconomic and Industry Analysis

Financial Statement Analysis

Options and Risk Management

Futures and Risk Management

Investors and the Investment Process

Hedge Funds

Filters

Your return will generally be higher using the if you time your transactions poorly and your return will generally be higher using the if you time your transactions well.

The M² measure of portfolio performance was developed by ________.