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Chap027 - Chapter 27 The Theory of Active Portfolio...

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Chapter 27 The Theory of Active Portfolio Management Multiple Choice Questions 1. In the Treynor-Black model A) portfolio weight are sensitive to large alpha values which can lead to infeasible long or short position for many portfolio managers. B) portfolio weight are not sensitive to large alpha values which can lead to infeasible long or short position for many portfolio managers. C) portfolio weight are sensitive to large alpha values which can lead to the optimal portfolio for most portfolio managers. D) portfolio weight are not sensitive to large alpha values which can lead to the optimal portfolio for most portfolio managers. E) none of the above. Answer: A Difficulty: Moderate 2. Benchmark portfolio risk is defined as 3. Benchmark portfolio risk 4. ____________ can be used to measure forecast quality and guide in the proper adjustment of forecasts. 675
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5. Even low-quality forecasts have proven to be valuable because R-squares of only ____________ in regressions of analysts' forecasts can be used to substantially improve portfolio performance. A) 0.656 B) 0.452 C) 0.258 D) 0.153 E) 0.001 Answer: E Difficulty: Moderate 6. The ____________ model allows the private views of the portfolio manager to be incorporated with market data in the optimization procedure. 7. The Black-Litterman model and Treynor-Black model are
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