Answer a and b)O

You have been asked to build a value portfolio for a client.

a) List at least 3 characteristics or accounting ratios that you would like to include in your signal. Describe how you could combine this information in a robust way to create your value signal. Briefly explain the reasons for each step in the approach.

b) Very briefly discuss how you might construct a portfolio from this signal. Again, briefly explain your choices.

c) This value portfolio will need to be rebalanced from time to time. Discuss briefly the various considerations that need to be considered when making the decision on how frequently to rebalance.

d) Your client would now like to include a momentum tilt or factor in the final portfolio. Would you advise your client to achieve this through portfolio blending or signal blending? (These are alternative approaches and each approach has its positives and negatives. Marks will be awarded for the discussion of the positives and negatives rather than the actual decision).