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Equity Investments MCQ - Equity Investments Section 1

31 The second major question to address when constructing an index is most likely:

The first major question to address is what is the target market? The second major question is what securities to select from the target market?

32 Analyst 1: Objective or mechanical rules are often used to determine the constituent securities of most indices.
Analyst 2: An index represents a list of securities and not a portfolio of actual securities.

Which analyst’s statement is most likely correct?

Both statements are correct.

33 The index weighting method that requires adjustment to the divisor after a stock split is:

The index weighting method that requires an adjustment to the divisor after a stock split is the price weighing method.

34 Which of the index weighting methods leads to indices that have a value tilt?

Fundamental weighting leads to indices that have a value tilt.

35 The index weighting that has a momentum effect is most likely to be:

Market capitalization weighted indices generally will have a momentum “effect”.

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Question:

An index based on market capitalization is most likely a:

A. broad market index.
B. sector index.
C. style index.

Correct answer: C

Explanation:

Style indices represent groups of securities classified according to market capitalization, value, growth, or a combination of these characteristics

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