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What is the basic trade-off when departing from pure indexing in favor of an actively managed portfolio?
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- What are the advantages of the index model compared to the Markowitz procedure for obtaining an efficiently diversified portfolio? What are its disadvantages?Explain how the portfolio approach to investment allows the reduction of risk and why Beta therefore is the most appropriate measure of stock risk?Portfolio theory as described by Markowitz is most concerned with:a. The elimination of systematic risk.b. The effect of diversification on portfolio risk.c. The identification of unsystematic risk.d. Active portfolio management to enhance return.
- What is the difference between a diversifiable riskand a nondiversifiable risk? Should stock portfoliomanagers try to eliminate both types of risk?What is the difference between active and passive portfolio managementDescribe why a fully diversified portfolio is said to have no unsystematic risk but has systematic risk? Then describe how the Arbritrage Pricing Theory (APT) has a cause and effect on the expected return of a security.
- How does the magnitude of firm-specific risk affect the extent to which an active investor will be willing to depart from an indexed portfolio?Explain Systematic (market risk) and Business-specific risk. Can diversification of the portfolio reduce each? please explain to me as simply as possible.Which of the following best describes an investor's risk-return trade-off function? Group of answer choices Indifference curves Capital Asset Pricing Model Characteristic line Efficient portfolio Arbitrage Pricing Model
- What is the constrained portfolio method or portfolio optiomatization? Why would an investor prefer a constrained portfolio optimization approach?Explain the differences between an ‘efficient portfolio’ and an ‘efficient market'Which are the different assets that have the potential to be combined efficiently in a portfolio that will provide an optimal risk-return relationship for investors?