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Basic Question 5 of 13
Consider two individual securities whose active returns are independent.
Suppose the benchmark portfolio for the two securities is equally weighted (50% for each security) and the forecasted return on the benchmark portfolio is 5%. According to the basic fundamental law, the information coefficient is ______.
User Contributed Comments 1
| User | Comment |
|---|---|
| davidt87 | why wouldnt they keep 25 and 20 as percentage decimals? very confusing and unreliable way to work things out |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
describe and interpret the fundamental law of active portfolio management including its component terms - transfer coefficient, information coefficient, breadth, and active risk (aggressiveness);
CFA® 2025 Level II Curriculum, Volume 6, Module 38.