Chapter 17: Investment Management

Question 1

The risk created by general economic conditions is known as _____ because the risk stems from the wider economic system.

Answer 1

Systematic risk

Question 2

Risk that is specific to a certain company or security is widely known as…

Answer 2

Specific risk

Question 3

One of the most important principles of investing. When assets and/or asset classes with different characteristics are combined in a portfolio, the overall level of risk is typically reduced.

Answer 3

Diversification

Question 4

Involves selling some of the holdings that have increased as a proportion of the portfolio and investing the proceeds into the holdings that have decreased as a proportion of the portfolio.

Answer 4

Rebalancing

Question 5

The long-term mix of assets that is expected to meet the investors objectives. The desired overall risk and return profile of the portfolio is a factor in determining the _____.

Answer 5

Strategic asset allocation

Question 6

A short term adjustment among asset classes is known as _____.

Answer 6

Tactical asset allocation

Question 7

This process means conducting a thorough analysis of a company’s business model, its prospects, and its financial situation.

Answer 7

Fundamental analysis

Question 8

Managers use this method to study market information, including price patterns and treating volumes.

Answer 8

Technical analysis

Question 9

Managers use this method to focus on indicators of market sentiment, such as manufactures new orders or indices of consumer expectations

Answer 9

Behavioral analysis