How is risk controlled in a stock-based enhanced indexing strategy? A) Through monitoring factor risk and industry exposures. B) Buying puts on equity indices. C) Selling equity futures contracts.
A can you post the answers of those 2 questions?
Ans is A. Chi Paul and pupdawg82… why B & C are not righ choices. Just want to make sure my understanding is correct for not choosing them too.
I went with A because the question was about stock based enhanced indexing and B and C are derivative based.
A - enchanced stock investment funds track an index but slightly differs from the index through factor selection (security, sector, industry, etc). i.e. index has 20% financials while the enchanced fund has 20% as well but might over/underweight some securities to come to that 20%
Thanks Chi Paul & BiPolarBoyBoston.
Which reading are you talking about ?
SS 11 Equity Portfolio Management contrast derivatives-based versus stock-based enhanced indexing strategies and justify enhanced indexing on the basis of risk control and the information ratio