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The equity mutual fund’s risk audit committee is currently evaluating a new portfolio construction strategy proposed by a recently appointed portfolio manager. This manager has received capital to manage and has the autonomy to select and implement the portfolio construction techniques they deem appropriate. However, it is a mandatory requirement that any chosen method adheres to the firm's pre-defined key risk control objectives. Which of the following portfolio construction methods accurately reflect their effectiveness in managing risk within the portfolio construction process?
A
Quadratic programming allows for risk control through parameter estimation but generally requires many more inputs estimated from market data than other portfolio construction techniques do.
B
The screening technique provides superior risk control by concentrating stocks in selected sectors based on expected alpha.
C
When using the stratification technique, risk control is implemented by overweighting the categories with lower risks and underweighting the categories with higher risks.
D
When using the linear programming technique, risk is controlled by selecting the portfolio with the lowest level of active risk.