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The equity mutual fund's risk audit committee is currently evaluating a portfolio construction strategy recommended by a newly appointed portfolio manager entrusted with capital management. Although the fund grants its managers the autonomy to select and employ appropriate portfolio construction techniques, it is imperative that the chosen method aligns with the key risk management objectives set by the company. Which of the following portfolio construction methods accurately reflects its ability to manage risk in the context of portfolio construction?
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 require.
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.