IFoA SA7 Practice Questions - IFoA SA7 Investment And Finance Specialist Advanced Exam

Access More Questions

A CIO is reviewing the efficient frontier from a mean-variance optimisation. A key practical criticism of using unconstrained mean-variance optimisation directly for strategic asset allocation is that it:

Always produces equally weighted portfolios regardless of inputs Cannot incorporate a risk-free asset under any circumstances Is highly sensitive to small changes in expected return inputs, producing extreme, unstable, error-maximising weights Guarantees that the chosen portfolio will outperform the benchmark

Correct Answer:

Is highly sensitive to small changes in expected return inputs, producing extreme, unstable, error-maximising weights

Access more questions from this quiz

Continue to IFoA SA7 Practice Questions - IFoA SA7 Investment and Finance Specialist Advanced Exam for more practice questions and the full quiz experience.

Access More Questions