Question #3
Reading: Reading 36 Using Multifactor Models
PDF File: Reading 36 Using Multifactor Models.pdf
Page: 1
Status: Unattempted
Correct Answer: A
Question
Janice Barefoot, CFA, has been managing a portfolio for a client who has asked Barefoot to use the Dow Jones Industrial Average (DJI
Answer Choices:
A. positive and negative respectively
B. negative and positive respectively
Explanation
Since the communications stocks had a negative return while all the other stocks had a
positive return, Barefoot's underweighting of those stocks produced a positive tilt return.
Since the asset chosen to replace the DJIA stock outperformed the omitted stock, the asset
selection return was positive.