ADMS 3530 Study Guide - Quiz Guide: Tax Deferral, Pension, Dividend Tax
24 Mar 2017
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Active management & performance management (21: a truly passive portfolio strategy entails holding the market index portfolio and a money market fund. A typical example is the attempt of portfolio managers to time the market, resulting in ever-changing portfolio betas: the appropriate performance measure depends on the role of the portfolio to be evaluated. When the portfolio represents the entire investment fund. When the portfolio represents the active portfolio to be optimally mixed with the passive portfolio. When the portfolio represents one subportfolio of many. The rate of return to a perfect market timer will be uncertain. However, its risk characteristics are not measurable by standard measures of portfolio risk, be- cause perfect timing stocks will outperform bills is given by the conditional probabilities of the true outcome given the forecasts: p1 1 p2 2 1. A regression of fund returns on the style portfolio returns generates residuals that represent the value added of stock selection in each period.
