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1)The tracking portfolio: A) needs to have the less sensitivity to each factor as the asset we are tracking B) needs to have the same sensitivity to each factor as the asset we are tracking C) needs to have the more sensitivity to each factor as the asset we are tracking D) none of the above 2)Which of the following is/are subjective, according to the separation property of the asset allocation? Select one or more: A
1)The tracking portfolio:
A) needs to have the less sensitivity to each factor as the asset we are tracking
B) needs to have the same sensitivity to each factor as the asset we are tracking
C) needs to have the more sensitivity to each factor as the asset we are tracking
D) none of the above
2)Which of the following is/are subjective, according to the separation property of the asset allocation? Select one or more: A. Determination of the efficient frontier B. Choice of the optimal complete portfolio C. Determination of the optimal risky portfolio D. Capital allocation between a risk-free asset and the optimal risky portfolio E. Determination of the best CAL
Expert Solution
1)
Answer:- Option B) needs to have the same sensitivity to each factor as the asset we are tracking
Explanation:- The theoretical construction of a tracking portfolio done through multifactor modeling is done by setting each factor sensitivities equal to the factor sensitivities of the benchmark.
2)
A separation property is a pivotal component of present day portfolio hypothesis that enables a portfolio chief to isolate the way toward fulfilling putting customers' benefits into two separate parts.
c. Determination of the optimal risky portfolio
d. Capital allocation between a risk-free asset and optimal risky portfolio
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