HW1 - Homework 1 Portfolio Management Process 1-3 HW-1 A...

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Homework 1 Portfolio Management Process 1-3 HW-1 A paper describes a country allocation strategy across five major equity markets: the United States, the United Kingdom, Germany, France, and Japan. In the strategy, a measure of relative attractiveness among the five equity markets is used as a factor in determining the weights of the five equity markets in the overall portfolio. The investment in each country, however, whatever the country’s weight, is an indexed investment in the equity market of that country. The weights of the five equity markets in the overall portfolio generally are expected to differ from the benchmark weights (the weights of the countries in an appropriate benchmark for the international equity market), within limits. Characterize the two components (portfolio weights and within country investments) of the country allocation strategy using the framework for classifying investment strategies. Ans : The country allocation strategy as described mixes elements of active and passive investment approaches. The portfolio weights are actively determined and differ from benchmark weights, within limits. However, the investments in individual countries are passive, indexed investments. Characterize the country allocation strategy overall. (Hint: think about active versus passive investment strategy and how the risk control is implemented) ANS: B. Overall, we can classify the country allocation strategy as a semi-active or controlled- active investment approach.
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