Australian Investment Performance Quiz

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Questions and Answers

According to the text, what is the historical average return on equities in Australia?

  • 10-11.5% (correct)
  • 15-16%
  • 2-3%
  • 4-6%

According to the text, what is the historical equity premium?

  • 2-3%
  • 4-6% (correct)
  • 12-14%
  • 8-10%

According to the text, what is the main factor contributing to portfolio return?

  • Asset allocation (correct)
  • Security selection
  • Diversification principles
  • Risk tolerance

According to the text, what is the main purpose of asset allocation in portfolio construction?

<p>To determine the percentage of funds invested in different asset classes (A)</p> Signup and view all the answers

According to the text, what is the second step in constructing a diversified investment portfolio?

<p>Security selection (A)</p> Signup and view all the answers

According to the text, what is the main difference between active and passive management styles?

<p>Active management aims to outperform the market, while passive management aims to match the market (A)</p> Signup and view all the answers

According to the text, what is the main reason for the little value added in the selection of specific assets within asset classes?

<p>Inconsistency with theoretical diversification principles (A)</p> Signup and view all the answers

According to the text, what is the main factor determining the two-step process of constructing a diversified investment portfolio?

<p>Investor risk tolerance (A)</p> Signup and view all the answers

According to the text, what is the main purpose of investment strategies?

<p>To maximize expected return (C)</p> Signup and view all the answers

According to the text, what is the historical evidence regarding 'real' rates of return over time?

<p>They have remained relatively constant (B)</p> Signup and view all the answers

Which type of investment has typically provided stable and higher long-term returns compared to other assets?

<p>Equities (C)</p> Signup and view all the answers

What can happen to short-term investments in equities?

<p>They can lead to losses due to market volatility (D)</p> Signup and view all the answers

During the 2008 Global Financial Crisis, what happened to the S&P/ASX200 Index?

<p>It dropped from nearly 7000 to below 3500 points (A)</p> Signup and view all the answers

Where can you buy and sell listed shares in Australia?

<p>Through the Australian Stock Exchange (ASX) (D)</p> Signup and view all the answers

What is the 'paradox' of the Efficient Markets Hypothesis (EMH)?

<p>Information has already been impounded into share prices (C)</p> Signup and view all the answers

What is technical analysis, or charting, based on?

<p>Price history charts and other indicators (C)</p> Signup and view all the answers

What do technical analysts evaluate in financial time series?

<p>Patterns, indicators, trends, and bull/bear dominance (D)</p> Signup and view all the answers

Where can you find real-time share prices for ASX-listed companies?

<p>Both on the ASX website and in the daily financial press (D)</p> Signup and view all the answers

What forms of documentation relate to a shareholding?

<p>Contract note, Holding Statement, and dividend statement (B)</p> Signup and view all the answers

Which type of transaction is usually the cheapest?

<p>Transacting online (C)</p> Signup and view all the answers

What is the main difference between strategic asset allocation (SAA) and tactical asset allocation (TAA)?

<p>SAA assumes efficient pricing, while TAA assumes mispricing (C)</p> Signup and view all the answers

What is the main objective of strategic asset allocation (SAA)?

<p>To identify efficient allocation amongst asset classes (D)</p> Signup and view all the answers

Which of the following is true about tactical asset allocation (TAA)?

<p>Managers choose it if they believe certain asset classes are mispriced (C)</p> Signup and view all the answers

Which of the following best describes strategic asset allocation (SAA)?

<p>Setting target allocations amongst asset classes (D)</p> Signup and view all the answers

What is dynamic asset allocation (DAA) primarily associated with?

<p>Periodic rebalancing of portfolio weights (A)</p> Signup and view all the answers

What is the purpose of market timing in tactical asset allocation (TAA)?

<p>To profit from timing aggregate market movements (D)</p> Signup and view all the answers

What is the reason for an equity risk premium?

<p>Equity represents a residual claim on the cashflows generated by the assets of the firm (D)</p> Signup and view all the answers

Which of the following methods is NOT a principal method of equity capital raising?

<p>Dividend reinvestment plan (B)</p> Signup and view all the answers

What is the main difference between direct and indirect investment in equity?

<p>Direct investment involves purchasing shares, while indirect investment does not (C)</p> Signup and view all the answers

What determines the allocation of funds to different asset management teams?

<p>The fund's investment philosophy (C)</p> Signup and view all the answers

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