- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 38. Analysis of Active Portfolio Management
- Subject 4. Applications of the Fundamental Law
CFA Practice Question
In the "Global Equity Strategy" example, the transfer coefficient, information coefficient, and breadth are assumed to be 0.982, 0.1, and 27.0, respectively. The United Kingdom is expected to have a strong outperformance (2.0) and its active return volatility is calculated as 5.8%. What is its expected active return?
B. 1.2%
C. 2.9%
A. 5.8%
B. 1.2%
C. 2.9%
Correct Answer: B
The rule is IC x volatility x score. 0.1 x 5.8% x 2 = 1.2%
User Contributed Comments 2
| User | Comment |
|---|---|
| davidt87 | why did they even give us that equation in the previous section? where is this equation coming from? |
| CFAJ | the "score" is basically how much it outperforms the outperform in proportion to the portfolio return? |