Thoms Investment Advisory Case Scenario, CFA Level II Mock Exam B: Afternoon Session, question #60

In the Thoms Investment Advisory Case Scenario, CFA Level II Mock Exam B: Afternoon Session, question #60,

Why did we rely on the highest tracking error not the highest Information risk which indicates the highest active management?

The question is stated below;

EXHIBIT 2

PANEL A: FACTOR MODEL AND PORTFOLIO CHARACTERISTICS

Sector Region** Mean Local Index Return βROE βMKT βINV Information Ratio **Tracking Error Eurozone 8.5% 0.3

0.20

1.5 0.971 3.500% North America 6.0% 0.9 0.90 0.4 1.192 4.000% Pacific Rim 9.0% 0.6 0.93 0.9 0.509 9.375% Japan 5.0% 0.9 0.88 0.6 1.620 3.000%

Q. According to the data in Exhibit 2, which portfolio most likely exhibits the risk characteristics of an aggressive active equity manager?

  1. Pacific Rim portfolio
  2. Eurozone portfolio
  3. Japan portfolio

Just posted yesterday… https://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91365970

Different Topic title that’s why I did not view it, thanks.