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Basic Question 0 of 11
Which is true regarding factor portfolios?
II. Since there are many assets, such portfolios can be constructed for each factor.
III. If a portfolio manager wants to bet on a source of risk, he or she may use factor portfolios.
I. A factor portfolio is a well-diversified portfolio with a beta coefficient equal to one for a specific factor and zero for all other factors.
II. Since there are many assets, such portfolios can be constructed for each factor.
III. If a portfolio manager wants to bet on a source of risk, he or she may use factor portfolios.
User Contributed Comments 4
| User | Comment |
|---|---|
| wink26 | Wha? A portfolio that has exposure to a one factor is diversified? I don't agree with I. |
| jay1 | yes you can have well-diversified portfolios that are sensitive to one factor. Check the example 11 of the reading. Being well-diversified means there is no unsystematic risks. That's it. |
| dblueroom | The CAMP is an example of one factor portfolio. Only market risk is considered and priced, as compared to multifactor APT, asset return has exposure to multiple factors. |
| StJohnDale | I think this question belongs in the next section? |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
describe and compare macroeconomic factor models, fundamental factor models, and statistical factor models;
CFA® 2026 Level II Curriculum, Volume 5, Module 40.