Question #16
Reading: Reading 35 Exchange-Traded Funds - Mechanics and Applications
PDF File: Reading 35 Exchange-Traded Funds - Mechanics and Applications.pdf
Page: 5
Status: Incorrect
Correct Answer: B
Your Answer: A
Question
Which of the following is most likely to represent a passive strategy for constructing an ETF?
Answer Choices:
A. Smart beta
B. Representative sampling/optimization
C. Alternative weighting
Explanation
Replicating index performance by using an optimized sample rather than investing in all
the securities in the index is considered a passive ETF strategy. Active management
strategies used in the construction of ETFs include factor (smart beta), discretionary active,
alternatively weighted, dynamic asset allocation and multi-asset strategies.