Question

Sara is an equity portfolio manager for a local endowment.  She believes that it is hard to achieve alpha in efficient segments of the stock market, such as large cap core.  But she has found that managers are more likely to provide alpha when they are focusing on less efficient areas of the equity market, such as small cap stocks and international stocks.  As a result, she has convinced the endowment that they should use indexed funds for the efficient part of the equity market and then use active managers for the less efficient areas.  This approach is called the _____.

A) core-satellite approach

B) market-neutral approach

C) pairs arbitrage approach

D) stratified sampling approach When managing equity portfolios, the managers at State Bank typically screen an investment universe for company-specific fundamentals or factors.  They then review the stocks that pass their screens and identify those stocks that should be purchased into their equity portfolios.  They are not usually concerned about macroeconomic projections when making their stock selection decisions.  This approach to equity security selection is called _____. A) bottoms-up B) full replication C) top-down D) market-neutral

Answer 1

1)

A) core-satellite approach

because in this case two way inveting is used core is more passive style while satellite is more active investment style

2)

A) bottoms-up

as in this case, focus is on the analysis on the companies which is at the bottom of EIC (economy, industry and Company) pyramid

the above is answer..