20 Questions
What is the main focus of asset allocation?
Balancing return correlations between asset classes
Why should the elements of an asset class be homogeneous?
To exhibit a similar risk-return profile
What does a relatively low correlation between asset classes indicate?
Opportunity for achieving greater diversification
Why is it necessary to be more specific about bonds for the purpose of asset allocation?
To understand the relevant dimensions of the bond space
What is the primary reason for redefining asset classes when the criteria are not met?
To place some under the same heading and segregate others
What are the relevant dimensions of the equity space?
Capitalization, styles, sector belonging, interest rate sensitivity
What do real estate and private equity have in common as alternative assets?
Both are affected by cyclical and monetary policy changes
What are the relevant determinants of the investment universe?
Time horizon, investment policy, pricing anomalies, investment strategy
What are the maximum volatility of returns and maximum drawdown considered in?
Risk tolerance
What does tactical asset allocation involve deviations from?
Target weights of the strategic asset allocation
What was the average outperformance of the fundamentally-based indices compared to cap-weighted indices?
197 basis points
What counter-argument was raised by Perold (2007) against the fundamentally-based indices?
They are not macro-consistent
According to Kaplan (2008), what must fundamentally-based indices have in order to add value?
Higher correlation with fair value
What is the main advantage of style-based indices according to the text?
They are more suitable for various styles of investment
What significant difference was highlighted between the S&P 600 and the Russell 2000 index?
Significant difference in performance
What are the central questions in the context of performance evaluation?
Did the return produced by the manager justify the risk taken? and Which decisions gave rise to over- or underperformance?
Which of the following is NOT a criterion for a suitable benchmark as discussed in the text?
Actively managed
What advantage do cap-weighted indices have according to the text?
They are a relevant and cheap alternative to active fund management
Why have some experts raised doubts about the suitability of cap-weighted indices?
"Overpriced stocks" tend to assume an increasing weight in the index, while "underpriced stocks" will assume a declining weight
What is the basis for proposing fundamentally-based indices as an alternative to cap-weighted indices?
"Overpriced stocks" tend to assume an increasing weight in cap-weighted indices
Learn about performance evaluation in asset allocation, focusing on how sponsors evaluate third-party fund managers. Explore the central questions of performance appraisal and performance attribution, which assess the return produced by the manager and the decisions that influenced it.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
