A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.
A) factor
B) market
C) index
D) a and b
E) a,b,and c

Question

Quizplus · Accepted Answer

A factor portfolio is designed to have a beta of 1 on one specific factor, such as interest rates or inflation, and a beta of 0 on all other factors. This allows investors to isolate the impact of that specific factor on their portfolio returns. A market portfolio, on the other hand, is designed to have exposure to all factors in the market, while an index portfolio tracks a specific index. Therefore, option A is the correct choice.

A _________ Portfolio Is a Well-Diversified Portfolio Constructed to Have