Practice Test Geeks(AAMS) Accredited Asset Management Specialist Practice Test
← All AAMS Flashcard Decks

Asset Allocation & Selection Flashcards

7 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Asset Allocation & Selection flashcards as text

  1. Which concept describes the tendency of asset class returns to move together during market crises, reducing diversification benefits?

    Answer: Contagion

    Contagion refers to the spread of financial distress across markets, causing correlations to spike toward 1.0 during crises.

  2. A tactical asset allocation shift increasing equity exposure based on a perceived market undervaluation is best described as:

    Answer: A short-term deviation from strategic allocation

    Tactical asset allocation involves short-term, deliberate deviations from the strategic benchmark to exploit market inefficiencies.

  3. Which metric would an advisor use to evaluate whether additional portfolio diversification is still beneficial?

    Answer: Marginal contribution to risk

    Marginal contribution to risk measures how much each additional holding adds to total portfolio risk, indicating when diversification benefits diminish.

  4. In mean-variance optimization, which input has historically been the MOST difficult to estimate accurately?

    Answer: Expected returns

    Expected returns are notoriously difficult to forecast accurately, making them the most problematic input in mean-variance optimization.

  5. A 75-year-old retiree asks about increasing equity allocation for inflation protection. Which consideration should the advisor prioritize FIRST?

    Answer: The client's remaining investment horizon and sequence-of-returns risk

    Sequence-of-returns risk is critical for retirees, as early large losses can permanently impair a portfolio's ability to sustain withdrawals.

  6. Which type of real asset provides both inflation-linkage and income through lease payments?

    Answer: Real estate investment trusts (REITs)

    REITs provide inflation-linked income through rents and offer portfolio diversification as a real asset class.

  7. What does 'alpha' represent in the context of active asset selection?

    Answer: Return in excess of a benchmark after adjusting for risk

    Alpha is the risk-adjusted excess return generated by active investment decisions beyond what market exposure (beta) would explain.