Investment Jobs Portfolio Analysis Test 3

Question 1

What does the information ratio measure in portfolio management?

Accepted Answer

Active return relative to tracking error

Answer

Return relative to total risk

Answer

Systematic risk relative to market risk

Answer

Dividend yield relative to price

Question 2

In a liability-driven investment (LDI) strategy, what is the primary objective?

Accepted Answer

Matching or hedging future liabilities with corresponding assets

Answer

Maximizing total return

Answer

Achieving the highest Sharpe ratio

Answer

Minimizing portfolio turnover

Question 3

Which of the following best describes a 'factor model' in quantitative portfolio management?

Accepted Answer

A model that explains returns through exposure to common risk factors

Answer

A model that predicts stock prices using technical indicators

Answer

A model that calculates maximum diversification

Answer

A model that determines optimal portfolio turnover

Question 4

What is 'convexity' in the context of bond portfolio analysis?

Accepted Answer

The measure of the curvature in the price-yield relationship of a bond

Answer

The relationship between bond yields and stock prices

Answer

The premium paid for callable bonds

Answer

The spread between corporate and treasury yields

Question 5

In strategic asset allocation, how frequently is the target allocation typically reviewed and updated?

Accepted Answer

Periodically (e.g., annually or when long-term assumptions change)

Answer

Daily, based on market movements

Answer

Every trading session

Answer

Only when the portfolio loses value

Question 6

What is 'mean reversion' and how does it affect portfolio strategy?

Accepted Answer

Asset prices or returns tend to return toward their long-run historical averages

Answer

Assets always revert to a zero return over time

Answer

Portfolio returns converge to the benchmark return

Answer

Dividends must increase to match inflation