B IS CORRECT. THE ABILITY OF THE FUND MANAGER TO EFFICIENTLY CONST...

10. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R51 ANALYSIS OF ACTIVE PORTFOLIO MANAGEMENT Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R51 ANALYSIS OF ACTIVE PORTFOLIO MANAGEMENT Q BANK

10. B is correct. The ability of the fund manager to efficiently construct portfolios by using their

forecasted active returns is indicated by the transfer coefficient. The TC is measured as the

correlation between risk-adjusted forecasted active returns and risk-adjusted actual active

weights.

Risk weighted forecasts [E (R

A

)/σ] Risk adjusted weights [Act. wt. x σ]

Manager 1 Manager 2 Manager 3 Manager 1 Manager 2 Manager 3

0.27

0.13

0.0075

0.0113

(0.0075)

Descon

0.15

0.24

0.06

(0.0043)

0.0051

Huda

0.0085

0.08

0.38

0.31

0.0039

(0.0130)

JJ

0.0026

0.569

0.476

0.910

TC

Manager 2 has the highest TC. Section 4.3. LO.c.