Gentry then considers the mandate for Pool 3:
- Since equity markets are believed to be efficient, the pool should use index approaches.
- The portfolio should be tracked on the basis of large cap versus small cap, as well as domestic, developed, and emerging markets.
- The most important benchmark feature is the liquidity of the component stocks.
In order to select the most appropriate benchmark index to fit the description in the mandate of Pool 3, the index construction should:
A
be exhaustive.
B
use free-float weighting.
C
use fundamental weighting.
B is correct. The mandate of Pool 3 emphasizes liquidity as a benchmark feature. Free-float weighting is a form of capitalization weighting. A cap-weighted index can be thought of as a liquidity-weighted index because the largest-cap stocks tend to have the highest liquidity and the greatest capacity to handle investor flows at a manageable cost.
A is incorrect. Exhaustive inclusion uses every stock in an index regardless of its liquidity.
C is incorrect. The mandate of Pool 3 explicitly states a belief in efficient markets. Fundamental weighting intends to exploit possible inefficiencies in market pricing caused by the overuse of cap-weighted approaches.
这一题，在core-equity, 第26题，第4问，有没有老师解答一下
