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investment analysis portfolio

Questions and Answers of Investment Analysis Portfolio

16. Comparing the two strategies in Exhibit 2, the best risk-adjusted performance is demonstrated by:A. Strategy II in periods of low volatility and recession.B. Strategy I in periods of high
15. The approach used by Fastlane Wealth Managers most likely incorporates:A. risk parity.B. data snooping.C. cross-validation.
14. Based on Exhibit 1, the factor with the smallest downside risk as measured by the weighted average of all losses that exceed a threshold is:A. Factor 1.B. Factor 2.C. Factor 3
13. Based on the statistical study performed by GWP, the tail dependence coefficient is most likely:A. low and negative.B. high and negative.C. high and positive.
12. The alternative approach to evaluate the backtesting of Value Portfolio I suggested by Rom is most likely:A. the Pearson information coefficient.B. the Spearman rank information coefficient.C. a
11. In Statement 3, Galic expresses the most concern about the backtesting step that involves:A. strategy design.B. analysis of backtesting output.C. historical investment simulation.
10. The key parameter most likely to be incorporated in the analysis of Value Portfolio I is:A. monthly rebalancing.B. the MSCI World equity index.C. hedged returns into domestic currency.
9. Which of Rom’s statements concerning backtesting is correct?A. Only Statement 1 B. Only Statement 2 C. Both Statement 1 and Statement 2
8. The process Ruckey suggests to better understand how the performance of Portfolios A and B using Approach 2 is affected by the distribution of Factor 1 returns is best described as:A. data
7. To address Concern 3 when designing Approach 1, Yuen should:A. bootstrap additional returns using a walk-forward framework.B. randomly sample from the historical returns with replacement.C. choose
6. Based on Concern 2, the Factor 1 strategy is most likely to:A. be favored by risk-averse investors.B. generate surprises in the form of negative returns.C. have return data that line up tightly
5. To address Concern 1 when designing Approach 2, Yuen should:A. model each factor or asset on a standalone basis.B. calculate the 15 covariance matrix elements needed to calibrate the model.C.
4. Approach 1 differs from Approach 2 in that:A. it is deterministic.B. a functional form of the statistical distribution for each decision variable needs to be specified.C. it assumes that sampling
3. Which of Ruckey’s statements about constructing multifactor portfolios is correct?A. Only Statement 1 B. Only Statement 2 C. Both Statement 1 and Statement 2
2. Based on Exhibit 1, Ruckey should conclude that:A. Factor Strategy 1 portfolios experience the highest turnover.B. Factor Strategy 2 provides the strongest predictive power in the long term.C.
1. Following Ruckey’s adjustments to the initial vendor database, backtested returns will most likely be subject to:A. stale data.B. look-ahead bias.C. survivorship bias.
26. In Statement 4, Kynnersley describes a constraint associated with a:A. risk budget.B. position limit.C. stop-loss limit.
25. The risk measure referred to in Statement 3 is:A. active share.B. beta sensitivity C. ex post tracking error.
24. Based only on Exhibits 2 and 3, it is most likely that under:A. Scenario 1, Bond 2 outperforms Bond 1.B. Scenario 2, Bond 1 underperforms Bond 3.C. Scenario 3, Bond 3 is the best performing
23. Based on Exhibit 1, the daily 5 percent VaR estimate is closest to:A. 1.61 percent.B. 2.42 percent.C. 2.69 percent.
22. Based only on Statement 2, the risk measurement approach:A. ignores right-tail events in the return distribution.B. is similar to the Sharpe ratio because it is backward looking.C. provides a
21. In Statement 2, Kynnersley implies that the portfolio:A. is at risk of losing $4,500 each trading day.B. value is expected to decline by $90,000 or more once in 20 trading days.C. has a 5 percent
20. Based on Statement 1, IMA’s VaR estimation approach is best described as the:A. parametric method.B. historical simulation method.C. Monte Carlo simulation method.
19. The risk management tool referenced in Ming’s question:A. is widely accepted by regulators.B. takes into account asset liquidity.C. usually incorporates right-tail events.
18. When measuring the portfolio impact of the stress test suggested by McKee, which of the following is most likely to produce an accurate result?A. Marginal VaR B. Full revaluation of securities C.
17. Which measure should McKee use to estimate the effect on Flusk’s VaR from Ming’s portfolio recommendation?A. Relative VaR B. Incremental VaR C. Conditional VaR
16. The estimate requested in Analysis 2 is best described as:A. liquidity gap.B. surplus at risk.C. maximum drawdown.
15. The limitation of the approach requested for Analysis 1 is that it:A. omits asset correlations.B. precludes incorporating portfolio manager actions.C. assumes no deviation from historical market
14. To perform Analysis 1, McKee should use historical bond:A. prices.B. yields.C. durations.
13. The number of Flusk’s VaR breaches most likely resulted from:A. using a standard normal distribution in the VaR model.B. using a 95 percent confidence interval instead of a 99 percent
12. Based on Exhibit 1, Flusk’s portfolio is expected to experience:A. a minimum daily loss of $1.10 million over the next year.B. a loss over one month equal to or exceeding $5.37 million 5
11. What additional risk measures would be most appropriate to add to Hamilton’s risk assessment?A. Delta B. Duration C. Tracking error
10. Using the data in Exhibit 2, the portfolio’s annual 1% parametric VaR is closest to:A. CAD17 million.B. CAD31 million.C. CAD48 million.
9. The scenario analysis that Hamilton prepares for the committee is a valuable tool to supplement VaR because it:A. incorporates historical data to evaluate the risk in the tail of the VaR
8. The scenario analysis that Hamilton prepares for the committee is most likely a:A. stress test.B. historical scenario.C. hypothetical scenario.
7. Which risk measure is Hamilton most likely to present when addressing the committee’s concerns regarding potential losses in extreme stress events?A. Relative VaR B. Incremental VaR C.
6. Given Hamilton’s expectations, which of the following models is most appropriate to use in estimating portfolio VaR?A. Parametric method B. Historical simulation method C. Monte Carlo simulation
5. Which of the following statements should not be included in Abell’s report to management regarding the use of risk measures in capital allocation decisions?A. VaR measures capture the increased
4. To comply with the new bank policy on risk assessment, which of the following is the best set of risk measures to add to the chief risk officer’s risk reporting?A. Conditional VaR, stress test,
3. Which of the following statements regarding the VaR of the Index Plus Fund is correct?A. The expected maximum loss for the portfolio is $6.5 million.B. Five percent of the time, the portfolio can
2. Which of the following options strategies is Ferrell most likely to recommend for the client’s portfolio?A. Long calls B. Short calls C. Short puts
1. If Montes is expecting a 50 bp increase in yields at all points along the yield curve, which of the following trades is he most likely to execute to minimize his risk?A. Sell $35 million of P2 and
19. Whose statement regarding the use of multifactor models in active and passive portfolio management is correct?A. Lam only B. Cheung only C. Both Lam and Cheung
18. Is Lam’s comment regarding statistical factor models correct?A. Yes B. No, because he is incorrect with respect to interpretation of the models’ results C. No, because he is incorrect with
17. Which of Lam’s statements regarding macroeconomic factor models and fundamental factor models is correct?A. Only Statement 1 B. Only Statement 2 C. Both Statements 1 and 2
16. Based on Exhibit 2, which portfolio has the best information ratio?A. Portfolio 1 B. Portfolio 2 C. Portfolio 3
15. Based on Exhibit 1, the active risk for Portfolio 2 is explained by surprises in:A. GDP.B. consumer spending.C. all four model factors.
14. Based on the information in Exhibit 1, the expected return for Portfolio 1 is closest to:A. 2.58 percent.B. 3.42 percent.C. 6.00 percent.
13. Based on the data in Exhibit 2, which fund is most sensitive to the combined surprises in inflation and GDP growth in Exhibit 3?A. Fund A B. Fund B C. Fund C
12. The surprise in which of the following had the greatest effect on fund returns?A. Inflation on Fund B B. GDP growth on Fund A C. GDP growth on Fund C
11. Based on the data in Exhibits 2 and 3, the return for Portfolio AC, given the surprises in inflation and GDP growth, is closest to:A. 2.02 percent.B. 2.40 percent.C. 4.98 percent.
10. The two-factor model Zapata uses is a:A. statistical factor model.B. fundamental factor model.C. macroeconomic factor model.
9. The arbitrage opportunity identified by Zapata can be exploited with:A. Strategy 1: Buy $50,000 Fund A and $50,000 Fund B; sell short $100,000 Fund C.B. Strategy 2: Buy $60,000 Fund A and $40,000
8. Which of the following is not a key assumption of APT, which is used by Altuve to evaluate strategies and manage risks?A. A factor model describes asset returns.B. Asset-specific risk can be
7. A wealthy investor has no other source of income beyond her investments and that income is expected to reliably meet all her needs. Her investment advisor recommends that she tilt her portfolio to
6. Address the following questions about the information ratio.A. What is the information ratio of an index fund that effectively meets its investment objective?B. What are the two types of risk an
5. Suppose an active equity manager has earned an active return of 110 basis points, of which 80 basis points is the result of security selection ability. Explain the likely source of the remaining
4. Which type of factor model is most directly applicable to an analysis of the style orientation(for example, growth vs. value) of an active equity investment manager? Justify your answer.
3. Assume that the following one-factor model describes the expected return for portfolios:E(Rp) ¼ 0.10 þ 0.12βp,1 Also assume that all investors agree on the expected returns and factor
2. Last year the return on Harry Company stock was 5 percent. The portion of the return on the stock not explained by a two-factor macroeconomic factor model was 3 percent.Using the data given below,
1. Compare the assumptions of the arbitrage pricing theory (APT) with those of the capital asset pricing model (CAPM).
31. Based on Achler’s grid search analysis, the current model can be characterized as:A. underfitted.B. having low variance.C. exhibiting slight regularization.
30. Based on Exhibit 3, if Achler wants to improve model performance at the threshold p-value of 0.84, he should:A. tune the model to lower the AUC.B. adjust model parameters to decrease ROC
29. Based on Exhibit 3, which threshold p-value indicates the best fitting model?A. 0.57 B. 0.79 C. 0.84
28. Achler’s model training concern related to the model’s ability to discriminate could be addressed by randomly:A. oversampling the failed start-up data.B. oversampling the successful start-up
27. Based on Exhibit 2, Achler should exclude from further analysis words in:A. only Group 1.B. only Group 2.C. both Group 1 and Group 2.
26. The visual text representation technique that Achler recommends to Rivera is a:A. word cloud.B. bag of words.C. collection frequency.
25. Based on Exhibit 1, which token group has most likely undergone the text preparation and wrangling process?A. Token Group 1 B. Token Group 2 C. Token Group 3
24. Based on the source of the data, as part of the data cleansing and wrangling process, Achler most likely needs to remove:A. html tags and perform scaling.B. numbers and perform lemmatization.C.
23. Which of Rivera’s statements about differences in ML model building steps is correct?A. Only Statement 1 B. Only Statement 2 C. Both Statement 1 and Statement 2
22. Which of Bector’s remarks related to model training is correct?A. Only Remark 1 B. Only Remark 2 C. Both Remark 1 and Remark 2
21. Based on Exhibit 2, the accuracy metric for Dataset XYZ’s test set sample is closest to:A. 0.67.B. 0.70.C. 0.75.
20. Based on Exhibit 1, which confusion matrix demonstrates the most favorable value of the performance metric that best addresses Azarov’s concern?A. Confusion Matrix A B. Confusion Matrix B C.
19. Based only on Dataset XYZ’s composition and Bector’s view regarding false positive and false negative evaluation metrics, which performance measure is most appropriate?A. Recall B. F1 score
18. What percentage of Dataset ABC should be allocated to a training subset?A. 0 percent B. 20 percent C. 60 percent
17. Which of Bector’s statements regarding TF, IDF, and TF–IDF is correct?A. Statement 1 B. Statement 2 C. Statement 3
16. Based on the text exploration method used for Dataset ABC, tokens that potentially carry important information useful for differentiating the sentiment embedded in the text are most likely to
15. Based on Exhibit 2, the model’s accuracy metric is closest to:A. 77 percent.B. 81 percent.C. 85 percent.
14. Based on Exhibit 2, the model’s F1 score is closest to:A. 77 percent.B. 81 percent.C. 85 percent.
13. Based on Exhibit 2, the model’s precision metric is closest to:A. 78 percent.B. 81 percent.C. 85 percent.
12. Is Steele’s statement regarding the relationship between feature selection/feature engineering and model fit correct?A. Yes.B. No, because she is incorrect with respect to feature selection.C.
11. To address her concern in her exploratory data analysis, Steele should focus on those tokens that have:A. low chi-square statistics.B. low mutual information (ML) values.C. very low and very high
10. Given her objective, the visualization that Steele should create in the exploratory data analysis step is a:A. scatter plot.B. word cloud.C. document term matrix.
9. The output created in Steele’s Step 3 can be best described as a:A. bag of words.B. set of n-grams.C. document term matrix.
8. Steele’s Step 2 can be best described as:A. tokenization.B. lemmatization.C. standardization.
7. Is Steele’s statement regarding Step 1 of the preprocessing of raw text data correct?A. Yes.B. No, because her suggested treatment of punctuation is incorrect.C. No, because her suggested
6. Based on Exhibit 1, for the firm with ID #3, Steele should compute the scaled value for the “Interest Expense” variable as:A. 0.008.B. 0.083.C. 0.250.
5. During the preprocessing of the data in Exhibit 1, what type of data transformation did Steele perform during the data preprocessing step?A. Extraction B. Conversion C. Aggregation
4. What type of error is most likely present in the last row of data (ID #4) in Exhibit 1?A. Inconsistency error B. Incompleteness error C. Non-uniformity error
3. What type of error appears to be present in the IPO Date column of Exhibit 1?A. invalidity error.B. inconsistency error.C. non-uniformity error.
2. Steele’s concern about using Twitter data in the model best relates to:A. volume.B. velocity.C. veracity.
1. Which of Steele’s statements relating to the steps in building structured data-based and text-based ML models is correct?A. Only Statement 1 is correct.B. Only Statement 2 is correct.C.
10. Regarding neural networks (NNs) that Alef might potentially implement, which of the following statements is least accurate?A. NNs must have at least 10 hidden layers to be considered deep
9. Regarding Comment #2, Moresanu has been thinking about the applications of neural networks (NNs) and deep learning (DL) to investment management. Which statement(s) best describe(s) the tasks for
8. Assuming a Classification and Regression Tree (CART) model is initially used to accomplish Step 3, as a further step which of the following techniques is most likely to result in more accurate
7. Assuming a Classification and Regression Tree (CART) model is used to accomplish Step 3, which of the following is most likely to result in model overfitting?A. Using the k–fold cross-validation
6. Comparing two ML models that could be used to accomplish Step 3, which statement(s) best describe(s) the advantages of using Classification and Regression Trees (CART) instead of K-Nearest
5. The target variable for the labelled training data to be used in Step 3 is most likely which one of the following?A. A continuous target variable.B. A categorical target variable.C. An ordinal
4. The hyperparameter in the ML model to be used for accomplishing Step 2 is?A. 100, the number of small-cap stocks in Alef’s portfolio.B. 10,000, the eligible universe of small-cap stocks in which
3. Which of the following machine learning techniques is most appropriate for executing Step 2:A. K-Means Clustering B. Principal Components Analysis (PCA)C. Classification and Regression Trees (CART)

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