CPM Equity Portfolio Management

Question 1

The primary distinction between growth investing and value investing is:

Accepted Answer

Value investors seek underpriced stocks relative to fundamentals, while growth investors seek companies with above-average earnings growth potential

Answer

Growth investors only buy dividend-paying stocks

Answer

Value investing always outperforms growth investing

Answer

Growth investing ignores earnings

Question 2

Which equity valuation multiple compares stock price to earnings per share and is most widely used by analysts?

Accepted Answer

Price-to-earnings (P/E)

Answer

Price-to-book (P/B)

Answer

Enterprise Value/EBITDA

Answer

Dividend yield

Question 3

A portfolio manager's active share measures:

Accepted Answer

The percentage of portfolio holdings that differ from the benchmark, indicating the degree of active management

Answer

How much cash the portfolio holds

Answer

The portfolio's standard deviation

Answer

The manager's information ratio

Question 4

Factor investing (smart beta) attempts to systematically capture returns associated with:

Accepted Answer

Well-documented risk premia such as value, momentum, quality, and low volatility

Answer

Random stock selection

Answer

Market-cap weighting

Answer

Currency speculation

Question 5

Which of the following best describes the information ratio (IR) in equity portfolio management?

Accepted Answer

The ratio of active return (alpha) to tracking error, measuring the efficiency of active management

Answer

The ratio of total return to total risk

Answer

The ratio of dividend income to capital gains

Answer

The ratio of equity exposure to bond exposure

Question 6

In a top-down equity portfolio management approach, the manager begins by:

Accepted Answer

Analyzing macroeconomic conditions, then sectors, then individual stocks

Answer

Selecting individual stocks based on earnings

Answer

Screening for the lowest P/E ratios

Answer

Replicating the benchmark exactly