Derivatives-based versus stock-based enhanced indexing strategies

CFA Level III
#1

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.

#2

A?

#3

A can you post the answers of those 2 questions?

#4

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.

#5

I went with A because the question was about stock based enhanced indexing and B and C are derivative based.

#6

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%

#7

Thanks Chi Paul & BiPolarBoyBoston.

#8

Which reading are you talking about ?

#9

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