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Questions in this quiz (30)
1Regarding monetary policy, which is an incorrect statement?
- AMonetary policy is countercyclical.
- BMonetary policy impacts operate contemporaneously.
- CMonetary policy is for more effective is slowing down an economy than speeding one up.
2Which type of real estate would have the lowest expected returns over a period of prolonged deflation?
- ALow-quality properties with short leases.
- BHigh-quality properties with long leases.
- CHigh-quality properties with short leases.
3Equities as an asset class will show little effect from inflation as long as inflation is:
- Aabove the central bank’s target range.
- Bbelow the central bank’s target range.
- Cwithin the central bank’s target range.
4Deflation is most likely unattractive for:
- Acash
- Bbonds
- CHY bonds
5Assuming the market has confidence in the central bank’s inflation target, inflation and inflation expectations are:
- AInflation: Procyclical Inflation Expectations: Procyclical
- BInflation: Procyclical Inflation Expectations: Counter-cyclic
- CInflation: Counter-cyclical Inflation Expectations: Procyclical
6This approach to economic forecasting imposes consistency of analysis across items and time whereas this approach imposes no consistency of analysis?
- AConsistency: Econometric modeling No consistency: Checklist approach
- BConsistency: Economic indicators No consistency: Econometric modeling
- CConsistency: Checklist approach No consistency: Economic indicators
7Which approach to economic forecasting can include virtually any topic, perspective, theory, or assumption?
- AChecklist approach.
- BEconomic indicators.
- CEconometric modeling.
8A major difference between forecasting long-term average trend growth and short-to-intermediate GDP growth is that the trend growth:
- Areflects both labor inputs and TFP while cyclical forecasts only reflect labor inputs.
- Breflects the demand side of the economy while cyclical forecasts reflect the supply side.
- Creflects the supply side of the economy while cyclical forecasts reflect the demand side.
9Trickstanissibouroughville is expected to produce nominal GDP of $4.6T in 3 years, the share of corporate profits to GDP will be 6.8% while the PE multiple is expected to be 18x. The aggregate market value of equity today is $3.8T and the long-run real trend growth rate of GDP is estimated at 4.6% with inflation expectation of 2.4%. Assuming the dividend yield on the equity market will be constant at 2.2%, the E(re) over year over the next 3 years is closest to:
- A9.2%.
- B14.0%.
- C16.2%.
10Which country below most likely has the highest nominal trend growth rate of GDP?
Country Average Nominal 10-year Yield Average Inflation
A 3.80% 1.60%
B 4.10% 2.80%
C 6.40% 4.40%- ACountry A.
- BCountry B
- CCountry C
11An economy with below-trend growth has lowered tariffs and removed trade barriers on machinery and certain information and communication devices. The country is attempting to achieve:
- Agrowth in potential labor force size.
- Bgrowth from increasing capital inputs.
- Cgrowth in actual labor force participation.
12A data-mining bias typically develops due to:
- Amodel uncertainty.
- Bbiased methodology.
- Cthe failure to account for conditioning information.
13Developing unconditional forecasts by averaging over environments is a result of:
- Apsychological biases.
- Bthe misinterpretation of correlation.
- Cthe failure to account for conditioning information.
14A large data set had several significant relationships for which the analyst had not considered. Unfortunately, the relationships don’t seem to exist in other data sets for other markets or other time periods. The findings may have been the result of:
- Atime-period bias.
- Bdata-mining bias.
- Csurvivorship bias.
15A significant relationship between 2 variables as the result of a hypothesis test has not been found again across several markets and over differing time periods. The result may have been the result of:
- Atime-period bias.
- Bdata-mining bias.
- Csurvivorship bias.
16Using higher frequency data, weekly instead of monthly for example, will not improve the precision of sample:
- Ameans.
- Bvariances.
- Ccorrelations.
17Regime changes in the historical record give rise to:
- Arandom walks.
- Bnon-stationarity.
- Clog-normal asset price series.
18When analyst’s talk about imposing structure on historical data, they specifically mean:
- Aassuming some distributional properties of past data that are expected to describe future data.
- Busing a model that is presumed to have generated the data in the past and is expected to do so in the future.
- Cdeveloping time-series returns for asset classes all with the same look-back period and all with the same frequency of observations.
19The first step in determining CMEs is to:
- Aresearch the historical record.
- Bspecify the methods/models to be used to develop expectations.
- Cdetermine asset classes for which expectations will be developed.
20Since developing capital market expectations (CMEs) is a forward-looking undertaking, frameworks for developing CMEs would not suggest/include:
- Aresearching the historical record.
- Bextrapolating historical return data into projections.
- Cusing the historical record to determine possible ranges for future results.
21Forecasting asset class returns should not have, as an objective, the achievement of:
- Aprecision of projections.
- Bintertemporal consistency.
- Ccross-sectional consistency
22The primary determinant of long-run portfolio performance is:
- Asecurity market timing.
- Basset allocation decision.
- Csecurity selection decisions.
23Portlandia has completed a period of global integration while Troplandia is just entering an integration phase. A rebalancing of a global market portfolio would suggest:
- Areduce Portlandia equity exposure and increase Troplandia bond exposure.
- Bincrease Portlandia equity exposure and reduce Troplandia equity exposure.
- Creduce Portlandia equity exposure and increase Troplandia equity exposure.
24Local economic and market forces exert a greater influence on risk and return:
- Ain less globally segmented markets.
- Bin more globally integrated markets.
- Cin emerging markets than in developed markets.
25For global equity markets, country effects tend to be more important than industry effects for:
- Aemerging markets only.
- Bdeveloped markets only.
- Cboth emerging and developed markets.
26Country E’s equity market has a current Sharpe ratio (SRi) of 0.35 and volatility (σi) of 22%. Country E’s degree of integration with the global marketplace (φs) is currently 0.5 but expected to increase to 0.7. This will reduce the volatility of Country E’s equity market by 4% and increase Country E’s equity market return correlation (ρi,GM) with that of the global market portfolio by 0.12 from the current 0.6. If the Sharpe ratio of the global market portfolio is 0.30, Country E’s equity will premium will:
- Aincrease by 1.22%.
- Bdecrease by 1.22%.
- Cincrease by 4.61%.
27When using the Singer-Terhaar model, which level of integration is most likely to represent the asset class commodities?
- A0.55
- B0.75
- C0.85
28When using the Singer-Terhaar model, which level of integration is most likely to represent developing market equities?
- A0.40
- B0.65
- C0.90
29Country D’s equity market has a Sharpe ratio (SRi) of 0.23 and volatility (σi) of 15%. Country D’s degree of integration with the global marketplace (Φs) is 0.9. The Sharpe ratio of the global market portfolio (SRGM) is 0.30. Country D’s equity market returns have a correlation (ρi,GM ) of 0.9 with the returns on the global market portfolio. If the risk-free rate in Country D is 0.8%, the required rate of return on Country D’s equity market is closest to:
- A4.0%.
- B4.8%.
- C4.9%.
30Country C’s equity market has a Sharpe ratio (SRi) of 0.32 and volatility (σi) of 17%. Country C’s degree of integration with the global marketplace (Φs) is 0.71. The Sharpe ratio of the global market portfolio (SRGM) is 0.32. Country C’s equity market returns have a correlation (ρi,GM ) of 0.6 with the returns on the global market portfolio. If the risk-free rate in Country C is 2.6%, the required rate of return on Country C’s equity market is closest to:
- A3.3%.
- B3.9%.
- C6.5%.
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- Quiz on mmp5, created by Amit Mehta on 29/03/2020.
- Author
- Amit Mehta
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- English
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