NO.PZ2024022701000209
问题如下：
A disadvantage of an equal-weighted index is that:选项：
A.maintaining equal weights requires frequent reconstitution of the index. B.securities that represent a relatively large fraction of the target market value are underrepresented. C.securities that represent a relatively small fraction of the target market value are underrepresented.解释：
Solution-
Incorrect because an equal weighted index requires frequent rebalancing, not reconstitution, when its constituent securities’ prices change. Equal weighting has a number of disadvantages. After the index is constructed and the prices of constituent securities change, the index is no longer equally weighted. Therefore, maintaining equal weights requires frequent adjustments (rebalancing) to the index.
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Correct because this is considered a disadvantage of an equal weighted index. Equal weighting has a number of disadvantages. Securities that constitute the largest fraction of the target market value are underrepresented, and securities that constitute a small fraction of the target market value are overrepresented.
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Incorrect because smaller stocks are overrepresented in an equal weighted index. Equal weighting has a number of disadvantages. Securities that constitute the largest fraction of the target market value are underrepresented, and securities that constitute a small fraction of the target market value are overrepresented.
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