30 Questions
According to the text, what is the historical average return on equities in Australia?
10-11.5%
According to the text, what is the historical equity premium?
4-6%
According to the text, what is the main factor contributing to portfolio return?
Asset allocation
According to the text, what is the main purpose of asset allocation in portfolio construction?
To determine the percentage of funds invested in different asset classes
According to the text, what is the second step in constructing a diversified investment portfolio?
Security selection
According to the text, what is the main difference between active and passive management styles?
Active management aims to outperform the market, while passive management aims to match the market
According to the text, what is the main reason for the little value added in the selection of specific assets within asset classes?
Inconsistency with theoretical diversification principles
According to the text, what is the main factor determining the two-step process of constructing a diversified investment portfolio?
Investor risk tolerance
According to the text, what is the main purpose of investment strategies?
To maximize expected return
According to the text, what is the historical evidence regarding 'real' rates of return over time?
They have remained relatively constant
Which type of investment has typically provided stable and higher long-term returns compared to other assets?
Equities
What can happen to short-term investments in equities?
They can lead to losses due to market volatility
During the 2008 Global Financial Crisis, what happened to the S&P/ASX200 Index?
It dropped from nearly 7000 to below 3500 points
Where can you buy and sell listed shares in Australia?
Through the Australian Stock Exchange (ASX)
What is the 'paradox' of the Efficient Markets Hypothesis (EMH)?
Information has already been impounded into share prices
What is technical analysis, or charting, based on?
Price history charts and other indicators
What do technical analysts evaluate in financial time series?
Patterns, indicators, trends, and bull/bear dominance
Where can you find real-time share prices for ASX-listed companies?
Both on the ASX website and in the daily financial press
What forms of documentation relate to a shareholding?
Contract note, Holding Statement, and dividend statement
Which type of transaction is usually the cheapest?
Transacting online
What is the main difference between strategic asset allocation (SAA) and tactical asset allocation (TAA)?
SAA assumes efficient pricing, while TAA assumes mispricing
What is the main objective of strategic asset allocation (SAA)?
To identify efficient allocation amongst asset classes
Which of the following is true about tactical asset allocation (TAA)?
Managers choose it if they believe certain asset classes are mispriced
Which of the following best describes strategic asset allocation (SAA)?
Setting target allocations amongst asset classes
What is dynamic asset allocation (DAA) primarily associated with?
Periodic rebalancing of portfolio weights
What is the purpose of market timing in tactical asset allocation (TAA)?
To profit from timing aggregate market movements
What is the reason for an equity risk premium?
Equity represents a residual claim on the cashflows generated by the assets of the firm
Which of the following methods is NOT a principal method of equity capital raising?
Dividend reinvestment plan
What is the main difference between direct and indirect investment in equity?
Direct investment involves purchasing shares, while indirect investment does not
What determines the allocation of funds to different asset management teams?
The fund's investment philosophy
Test your knowledge on the historical performance of investments and the equity premium in Australia. Explore the average long-term returns on equities and the relative risk of shares, real property, and bonds.
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