Is there a difference between a PURE factor portfolio and factor portfolio?
My understanding is a factor portfolio has a beta/sensitivity of 1 to just one factor (ie. GDP) and zero to all others. I know where you are going with this, but I am not sure if I marked this answer correct on the CFAi mock. I have not reviewed the whole thing, but am about 50% of the way there. I can’t remember my exact answer, but I definitely marked it as not a factor portfolio because it did not match my description above. Someone please correct me if I’m wrong.
Lol yeah, I thought only a pure factor portolio had a sensitivity of 1 and 0 to others and since it said “factor” portfolio I marked it as correct and got it wrong.
They are not different, pure factor and factor portfolio have sensitivity of 1 to one factor and 0 to the rest. They have a PURE bet on just one particular one source of risk and 0 bet the rest