Which of the following least describes the fundamental weighting of indices? There may be a change in the weight of the constituent security versus its weight in a market capitalization index because the fundamental measure/ratio used to weight the assets is significantly higher or lower than its market capitalization weight. The weighting used in fundamental weighting is independent of the price of the security. The weights have to be rebalanced periodically as the fundamental attribute changes. This method has a momentum effect or bias because those stocks that increased in relative value will get even higher weights moving forward. The stocks in the index should include both “value” and “growth” stocks.
Which of the following least describes the fundamental weighting of indices? There may be a change in the weight of the constituent security versus its weight in a market capitalization index because the fundamental measure/ratio used to weight the assets is significantly higher or lower than its market capitalization weight. The weighting used in fundamental weighting is independent of the price of the security. The weights have to be rebalanced periodically as the fundamental attribute changes. This method has a momentum effect or bias because those stocks that increased in relative value will get even higher weights moving forward. The stocks in the index should include both “value” and “growth” stocks.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Which of the following least describes the fundamental weighting of indices?
- There may be a change in the weight of the constituent security versus its weight in a market capitalization index because the fundamental measure/ratio used to weight the assets is significantly higher or lower than its market capitalization weight.
- The weighting used in fundamental weighting is independent of the price of the security.
- The weights have to be rebalanced periodically as the fundamental attribute changes.
- This method has a momentum effect or bias because those stocks that increased in relative value will get even higher weights moving forward.
- The stocks in the index should include both “value” and “growth” stocks.
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