Equity

Question 1

When an equity investment segmented by size and style, how is it called by?

Answer 1

Large, mid and small cap

value, blend and growth stock

Question 2

What are the 3 segmentation by geography? and which one is the most risky?

Answer 2

Developed, emerging & frontier

Frontier is the most risky

Question 3

what are the 3 rules of choosing a benchmark?

Answer 3

Investable, transparent, rule-based

Question 4

What is the advantage of market-cap weighting?

Answer 4

Mean-variance efficient
High investment capacity
Biased toward large cap stock

Question 5

What is the difference between index rebalancing and reconstitution?

Answer 5

Index rebalancing is adjusting the index weight after some major events and changes
where reconstitution is adding or deleting names that are no longer in the index

Question 6

What are the principal sources of passive portfolio tracking error?

Answer 6

Fees, trading cost and cash drag